UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

            [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                  SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended
                  December 31, 2006.

            [_]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

                        Commission file number: 000-30563
                               DELTA MUTUAL, INC.
                 (Name of small business issuer in its charter)

            DELAWARE                                    14-1818394
        ---------------                               --------------
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                       Identification No.)

            111 North Branch Street, Sellersville, Pennsylvania 18960
               (Address of principal executive offices) (Zip Code)
                  ---------------------------------------------
                                (Former Address)

                                 (215) 258-2800
                         (Registrant's telephone number)

       Securities registered under Section 12(b) of the Exchange Act: NONE

         Securities registered under Section 12(g) of the Exchange Act:

                   COMMON STOCK (par value $0.0001 per share)

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to the filing requirements for the past 90 days. Yes [X] No [_]

      Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

      Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). [_] Yes [X] No


      Issuer's revenue for its fiscal year ended December 31, 2006: $279,870.

      Aggregate market value of the voting and non-voting common shares held by
non-affiliates of the registrant as of March 28, 2006: $3,106,144 (See Item 5)

      Number of shares outstanding of registrant's Common Stock, par value
$.0001, as of March 28, 2007: 62,272,286 shares of Common Stock (See Item 11)

      Documents incorporated by reference: NONE

      Transitional Small Business Disclosure Format (check one): Yes [_] No [X]

                                                                               1
<PAGE>

                                     PART I

                    NOTE REGARDING FORWARD LOOKING STATEMENTS

        CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS

             OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Annual Report contains historical information as well as forward- looking
statements. Statements looking forward in time are included in this Annual
Report pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements involve known and unknown risks
and uncertainties that may cause our actual results in future periods to be
materially different from any future performance suggested herein. We wish to
caution readers that in addition to the important factors described elsewhere in
this Form 10-KSB, the following forward-looking statements, among others,
sometimes have affected, and in the future could affect, our actual results and
could cause our actual consolidated results during 2007, and beyond, to differ
materially from those expressed in any forward-looking statements made by or on
our behalf.

Forward-looking statements include, but are not limited to, statements under the
following headings; (i) "Business Plan," about the development of certain
projects and business opportunities and the Company's attempts to convert these
plans and opportunities into operating businesses that generate revenues and
profits; (ii) "Business Plan," about the intentions of the Company to fund its
businesses and operations by borrowings and the successful placement of debt and
equity financings; (iii) "Results of Operations"; (iv) "Liquidity and Capital
Resources," about the Company's plan to raise additional capital; and (v)
"Liquidity and Capital Resources," about the contingent nature of the
consummation of any agreements with its contracting, joint venture and
partnership parties.

ITEM 1. DESCRIPTION OF BUSINESS

Unless the context otherwise requires, the terms "the Company," "we," "our" and
"us" refers to Delta Mutual, Inc., and, as the context requires, its
consolidated subsidiaries.

GENERAL

We were incorporated under the name Delta Mutual, Inc. on November 17, 1999, in
the State of Delaware with the purpose of providing mortgage services through
the Internet. Since current management joined the Company in 2003, we have
established business operations focused on providing environmental and
construction technologies and services to specific geographic reporting segments
in the Far East, the Middle East, the United States and Puerto Rico.

Our offices are located at 111 North Branch Street, Sellersville, PA 18960. Our
telephone number is (215) 258-2800. Our common stock is quoted on the
Over-the-Counter Electronic Bulletin Board under the symbol "DLTM.OB".

Business Plan

Since 2003, we have established a wholly owned subsidiary, a joint venture and
limited partnerships. This structure is primarily for the establishment of
business operations focused on providing construction and environmental
technologies and services to specific geographic business reporting segments in
the Far East, the Middle East, the United States and Puerto Rico.

                                                                               2
<PAGE>

The Company established a joint venture subsidiary primarily to conduct business
operations focused on providing environmental and construction technologies and
services in the Far East and the Middle East. In the United States, we
established a wholly owned subsidiary for development of construction
technologies. In Puerto Rico, we have established limited partnerships for
housing development.

Our   environmental    remediation    operations   are   carried   out   through
Delta-Envirotech,  Inc., a joint venture company formed in January 2004, with Hi
Tech  Consulting and  Construction,  Inc., to provide  environmental  technology
services for certain  business  segments  located in the Far East and the Middle
East. We have operating control of, and a forty-five  percent ownership interest
in,  Delta-Envirotech.  We have entered into strategic alliance  agreements with
several  United  States-based  entities  with  technologies  and products in the
environmental field to support the Company's worldwide activities and have these
technologies available.

Our wholly owned subsidiary, Delta Technologies, Inc., acquired intellectual
property and designed machine tool equipment to manufacture an innovative
concrete wall forming system. This system, known as Delta Wall, was developed
for the United States housing construction industry as well as for use in
residential housing construction projects in Puerto Rico.

We formed limited partnerships to conduct our housing development activities in
Puerto Rico for residential construction under the Section 124 low-income
housing program.

Far East (Indonesia)

In Indonesia, we formed a local joint venture company to conduct energy and
waste recovery operations. The joint venture company, PT Triyudha-Envirotech,
began operations in December 2005, pursuant to a contract with Pertamina, the
state owned oil company. We successfully completed the initial contract to
process 3,000 tons of oil sludge, in October 2006. We are currently negotiating
a second contract to process an unlimited amount of oil sludge at the same
refinery over a 12-month period.

Our joint venture's processing facility, located in Indramayu, Java, at the
Balengan Refinery, consists of sludge and water treatment holding tanks, a
centrifuge processing unit, an oil recovery tank, a water discharge pipeline
into the refinery waste water treatment facility and a self contained electrical
generator. All equipment was procured locally. The sludge is treated with
approved chemical emulsifiers that assist in breaking down the sludge. The
treated liquid is heated and enters into the centrifuge unit and is subjected to
approximately 500 G's of force, which separates the sludge into its components.
The separated oil rises to the top where it is recovered into an oil holding
tank. The water is sent via pipeline back to the refinery's water treatment
system for re-use. All of the equipment has been approved by the government
environmental authorities. The facility has the capacity to process 200 metric
tons of oil sludge per day, depending on the density of the sludge.

Middle East

In January 2004, we entered into a strategic alliance agreement between our
environmental remediation joint venture, Delta-Envirotech, Inc. ("Envirotech"),
and ZAFF International, Ltd. ("ZAFF"), to jointly pursue environmental and other
projects in the Middle East. In November 2004, ZAFF received its operating
license from the Saudi Arabia environmental authorities to employ all
environmental technologies held by Envirotech.

In August 2005, we reached a working agreement to provide equipment to
manufacture insulating concrete form (ICF) products for the building industry in
Saudi Arabia. In the first quarter of 2006, a memorandum of understanding was
signed that provided for two additional ICF factories. In July 2006, Envirotech
submitted a detailed proposal to the potential purchaser that resulted in a
Letter of Intent from the purchaser in September 2006.

                                                                               3
<PAGE>

On March 8, 2007, we received the purchase agreement to supply machinery,
equipment and other components and services for an ICF factory that will be
located in Saudi Arabia. This is our first project in Saudi Arabia and our
largest to date, valued at $3,369,000.

The equipment specified in the agreement consists of several ICF technologies
including our Delta Wall system. Under the terms of the agreement, payment will
be made by a letter of credit in four installments. We currently anticipate that
the letter of credit will be opened in the second quarter of 2007 and expect the
final payment in the first quarter of 2008.

On July 18, 2006 the Company announced that Envirotech had expanded its product
line by securing the master distribution rights for the Middle East, among other
areas, for environmentally friendly organic emulsifiers used in oil tank
cleaning and to enhance oil well production. The products are scheduled to be
tested in an oil storage tank in Ras Tanura, Saudi Arabia during the second
quarter of 2007. An oil well test application in Al Khafji, Saudi Arabia is also
scheduled during the second quarter.

In August 2006, we announced that Envirotech further expanded it product and
service offerings by securing the exclusive Middle East distribution rights for
an infrared gas-imaging product that detects and visualizes harmful gasses
produced by oilfield and refinery operations. The gas-imaging product is
currently under evaluation by ARAMCO, the Saudi government oil company. We
believe that if the evaluation is satisfactory, ARAMCO will purchase a unit.

During the fourth quarter 2006, Envirotech issued proposals for oil sludge
processing and recovery activities, using our combined technologies, for three
sites in the Middle East. These proposals are currently undergoing technical and
economic evaluation.

In August 2005, we reached a working agreement to provide technology and
equipment, on a turn-key basis, to recover silver from used x-ray film with the
Saudi Gulf Environmental Protection Company (SEPCO). During the second quarter
of 2006, a Letter of Intent was signed, subject to approval from the Saudi
environmental authority (PME). An inspection of this equipment in the U.S. was
scheduled by PME for the third quarter of 2006, for the purpose of issuing its
approval. Prior to the final inspection visit, SEPCO determined that the amount
of used x-ray film in country was not sufficient to justify its investment in
the processing equipment.

United States

In August 2005, we acquired, through Delta Technologies, Inc., certain
intellectual property and filed a patent application for a new insulating
concrete wall forming (ICF) system called Delta Wall. In addition to the patent
filing, the Company engaged a technical consultant and a business development
consultant to further the design and development of the Company's ICF products.

The machine tool equipment required to produce the new Delta Wall product was
completed in July 2006 and initial production began on September 15. In December
2006, we engaged an independent testing laboratory to evaluate our Delta Wall
product for the purpose of applying for approval under the International
Commercial Code (ICC). This evaluation is in process. ICC approval of our Delta
Wall product will facilitate local, national and international approvals.

Puerto Rico

We are pursuing low-income housing development in Puerto Rico. In November 2006,
we formed a new limited partnership, of which we are the general partner and 35%
owner, to acquire a suitable parcel of land for low income housing development
approved for Section 124 housing and zoned for residential construction. In
January 2007, we acquired an option, subject to bank financing, to purchase a 13
acre site located in Toa Alta for the planned development of approximately 338
residential housing units. The housing development project proposed on this
property was initiated by the property owner and has been approved under the
Section 124 program and is zoned for residential housing. We are currently in
the process of securing bank financing for the property acquisition and the
first phase of the housing construction.

                                                                               4
<PAGE>

Our initial Section 124 housing project for approximately 270 homes on a 36 acre
tract in Aguadilla , known as " Brisas del Atlantico," was ultimately rejected
for re-zoning and has been discontinued.

Our second majority owned joint venture was established in conjunction with
another developer, to build approximately 300 Section 124 homes on a 40 acre
tract located in Guayanilla. In March 2007, the project's developer informed us
that he does not intend to proceed with the development of this property.
Accordingly, we are in the process of discontinuing our activities associated
with this project.

COMPETITION

Until we have successfully obtained the full amount of debt or equity financing
required to fund our projected business operations, it is difficult to compete
with large, well-capitalized companies for governmental or private sector
environmental remediation contracts. Many of these contracts require significant
up-front expenditures on behalf of the firm awarded the contract.

There are many established environmental remediation companies that have
significantly greater financial and personnel resources and technical expertise
than we do. There are well-capitalized environmental services and technology
companies as well as highly capitalized housing development companies in our
target marketplaces that will continue to retain their dominance and competitive
advantages over us.

Our planned housing construction activity in Puerto Rico also faces intense
competition from larger, better-financed developers and construction companies.
Our new environmentally friendly wall forming system faces competition from
established companies and various technologies that have been used in the
industry for many years.


EMPLOYEES

Currently, we have four employees: Peter F. Russo, President and Chief Executive
Officer; Martin G. Chilek, Senior Vice President and Chief Financial Officer;
John Latza, President, Delta Technologies, Inc. and Judith Dallas, Director,
Administration. Assuming that we obtain the necessary funding to operate our
planned businesses, we plan to hire several additional personnel to support our
projected business operations.


RISK FACTORS

Our business is subject to numerous risk factors, including the following:

WE HAVE NOT OPERATED PROFITABLY SINCE INCEPTION, AND WE EXPECT TO INCUR LOSSES
IN THE FUTURE. WE WILL BE REQUIRED TO RAISE ADDITIONAL CAPITAL.

Our operations have only generated limited revenue and they are not profitable.
We have incurred net operating losses from the formation of our company through
December 31, 2006, Of $8,862,504 and expect that we will continue to incur
operating losses in the future. In 2006, we generated revenue of $279,870,
incurred operating expenses of $2,623,535 and had a net loss of $2,542,265. As
of March 28, 2007, we had approximately $50,000 of cash on hand to fund
operations. There is no assurance that we will operate profitably in the future.
Failure to achieve or maintain profitability may materially and adversely affect
the future value of our common stock.

We will have to obtain additional capital to continue development of our
proposed business. There is no assurance that we will be able to obtain
sufficient capital to develop our proposed environmental remediation and housing
development businesses and market our services successfully.

                                                                               5
<PAGE>

WE HAVE BEEN THE SUBJECT OF A GOING CONCERN OPINION FROM OUR INDEPENDENT
AUDITORS, WHICH MEANS THAT WE MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE
OBTAIN ADDITIONAL FUNDING.

Our independent auditors have added an explanatory paragraph to their audit
opinion, issued in connection with our consolidated financial statements, which
states that our ability to continue as a going concern is uncertain due to our
continued operating losses, the excess of our liabilities over our assets and
uncertain conditions we face in our day- to-day operations. Our consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

WE ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION FOR OUR PROPOSED
ENVIRONMENTAL REMEDIATION OPERATIONS.

Each aspect of our proposed environmental remediation business is subject to
significant environmental regulations by foreign governments. No assurances can
be given that such environmental laws or regulations, or that future changes in
environmental laws, regulations, or interpretations currently applicable to the
Company or changes in the nature of the Company's operations, will not adversely
impact our proposed operations or have a material adverse effect on the
financial condition, operations and liquidity of the Company.

OUR BUSINESS IS SUBJECT TO RISKS ASSOCIATED WITH OUR OFFSHORE OPERATIONS IN
INDONESIA.

We have commenced energy and waste recovery operations in Indonesia for the
processing of oil sludge from refineries. Our joint venture partner has received
all environmental approvals necessary to operate the permanent processing
installation. Adverse changes in governmental permits, approvals, laws or
regulations in Indonesia could harm our business, as could our failure to
receive from Pertamina further contracts for processing sludge in our processing
facility.

OUR INTERNATIONAL OPERATIONS EXPOSE US TO POLITICAL, ECONOMIC AND CURRENCY
RISKS.

With regard to our operations outside of the United States in Indonesia, we are
subject to the risks of doing business abroad, including,

      o     Currency fluctuations;

      o     Changes in tariffs and taxes; and

      o     Political and economic instability.

Changes in currency exchange rates may affect the relative costs at which we are
able to process sludge in Indonesia, and may affect the cost of certain items
required in our processing operation, thus possibly adversely affecting our
profitability.

There are inherent risks of conducting business internationally. Language
barriers, foreign laws and tariff and taxation issues all have a potential
negative effect on our ability to transact business in the Far East. Changes in
tariffs or taxes applicable to our joint venture in Indonesia may adversely
affect its profitability. Political instability may increase the difficulties
and costs of doing business in Indonesia. We may be subject to the jurisdiction
of the government and/or private litigants in foreign countries where we
transact business, and may be forced to expend funds to contest legal matters in
those countries in disputes with those governments or with customers or
suppliers.

AS A HOUSING DEVELOPER WE FACE ECONOMIC AND MARKET RISKS.

Many factors which are beyond our control will affect our proposed business as a
developer of housing, including, among others, general economic and real estate
market conditions, competitive factors, the availability and cost of borrowed
funds, real estate tax rates, federal and state income tax laws, operating
expenses (including maintenance and insurance), energy costs, government
regulations, including delays in acquiring or our inability to acquire required
permits, and potential liability under and changes in environmental and other
laws, as well as the successful management of the properties.

                                                                               6
<PAGE>

Our success as a developer of housing will also be subject to certain additional
risks including, but not limited to, (i) competition for existing and future
projects from other developers in the areas of our developed properties, (ii)
adverse changes in mortgage interest or terms of governmental financing, (iii)
possible adverse changes in general economic conditions and adverse local
conditions, such as competitive over-bidding, a decrease in employment or
adverse changes in real estate zoning laws, and (iv) other circumstances over
which we may have little or no control.

AS A SUPPLIER OF BUILDING PRODUCTS WE FACE ECONOMIC AND TECHNOLOGY RISKS.

The market for suppliers of building materials is very competitive. Our success
as a supplier of building materials will be subject to many factors that are
beyond our control including, among others, our successful marketing of our
products to construction firms in the various regions where we would operate,
general economic conditions in the construction industry and real estate market
conditions, technological developments by competitors, the availability and cost
of borrowed funds, government building codes and regulations, and compliance
with and potential liability under environmental and other laws.

OUR MARKETS ARE VERY COMPETITIVE.

Virtually all of our current and potential competitors have significantly
greater financial, marketing and technical resources than we have. As a result,
they may be able to leverage a customer base, adapt more quickly to new
technologies and changes in customer requirements, or devote greater resources
to the promotion and sale of their services and products than we can.

WE DO NOT EXPECT TO PAY DIVIDENDS.

We have never paid dividends on our common stock. Current Company management
anticipates that any earnings generated from our operations would be used to
finance our working capital requirements, to develop services and products and
for marketing. For the foreseeable future, cash dividends will not be paid to
holders of our common stock.

VOLATILITY OF STOCK PRICE.

The market price of our common stock, as is the case for companies without
established operations, is extremely volatile due to our uncertain future
prospects and general market and economic conditions. During the two year period
ended December 31, 2006, the closing per share price of our common stock has
fluctuated from $0.96 to $0.06 per share. Our common stock currently trades in
the OTC Bulletin Board market.

ITEM 2. DESCRIPTION OF PROPERTY.

We currently lease office space consisting of approximately 1,700 square feet in
an office building located in Sellersville, Pennsylvania. We are obligated to
pay a monthly rent of $650 as well as pay for certain utilities serving the
premises. Our lease is for a period of one year from March 1, 2006 to February
28, 2007, with additional twelve month renewal periods. The fist twelve month
renewal period began on March 1, 2007. We anticipate that our current office
space will accommodate our operations for the foreseeable future. We leased an
apartment in San Juan, Puerto Rico of approximately 650 square feet for a
monthly rental of $750. That lease expired on March 31, 2006 and was not
renewed. We also lease office space in Saudi Arabia on a month-to-month basis.

ITEM 3. LEGAL PROCEEDINGS.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

                                                                               7
<PAGE>

None.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock has been quoted on the Over-the-Counter Bulletin Board operated
by the National Association of Securities Dealers, since approximately February
1, 2001. Our shares are listed under the symbol "DLTM". The quotations in the
table below reflect inter-dealer prices, without retail mark-up, mark-down, or
commission and may not represent actual transactions.


                                        High                    Low
                                        -----                   -----



2005:   1st Quarter                     0.69                    0.28
        2nd Quarter                     0.96                    0.23
        3rd Quarter                     0.45                    0.28

        4th Quarter                     0.40                    0.15

2006:   1st Quarter                     0.32                    0.10
        2nd Quarter                     0.12                    0.06
        3rd Quarter                     0.45                    0.10
        4th Quarter                     0.25                    0.10

2007:   1st  Quarter                    0.16                    0.04
      (through March 28, 2007)

During the last two fiscal years, no cash dividends have been declared on
Delta's common stock and Company management does not anticipate that dividends
will be paid in the foreseeable future. As of March 28, 2007, there were 86
record holders of our common stock.

The following table sets forth information with respect to our common stock
issued and available to be issued under outstanding options, warrants and rights
as of December 31, 2006.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                  (a) (b) (c)
----------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                         <C>                       <C>
Plan category                     Number of securities to be   Weighted-average exercise    Number of securities
                                  issued upon exercise of      price of outstanding         remaining available for
                                  outstanding options,         options, warrants and        future issuance under
                                  warrants and rights          rights                       equity compensation plans
                                                                                            (excluding securities
                                                                                            reflected in column (a))
----------------------------------------------------------------------------------------------------------------------

Equity compensation plans
approved by security holders               7,978,000                   $0.11                     2,022,000
----------------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders
----------------------------------------------------------------------------------------------------------------------
Total                                      7,978,000                   $0.11                     2,022,000
----------------------------------------------------------------------------------------------------------------------
</TABLE>


RECENT SALES OF UNREGISTERED SECURITIES

                                                                               8
<PAGE>

This table sets forth our sales of unregistered securities in the last three
fiscal years that were not reported in a Current Report on Form 8-K or a
Quarterly Report on Form 10-QSB.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
       Date              Title and Amount            Purchasers          Principal             Total Offering
                                                                        Underwriter          Price/Underwriting
                                                                                                  Discounts
---------------------------------------------------------------------------------------------------------------------
<S>                     <C>                          <C>                     <C>              <C>
November 1, 2004        250,000 shares of
                        common stock                 Consultant              NA               $31,250/NA
---------------------------------------------------------------------------------------------------------------------
November 8, 2004        500,000 shares of
                        common stock issued          Private Investor        NA               $25,000/NA
                        upon conversion of a
                        promissory note in
                        the principal amount
                        of $25,000
---------------------------------------------------------------------------------------------------------------------
November 19, 2004       403,951 shares of            Private Investor        NA               $20,198/NA
                        common stock issued
                        upon conversion of a
                        promissory note in
                        the principal amount
                        of $20,000 (including
                        accrued interest)
---------------------------------------------------------------------------------------------------------------------
November 23, 2004       502,887 shares of            Private Investor        NA               $25,144/NA
                        common stock issued
                        upon conversion of a
                        promissory note in the
                        principal amount of
                        $25,00 (including
                        accrued interest)
---------------------------------------------------------------------------------------------------------------------
December 6, 2004        150,000 shares of            Private Investor        NA               $15,000/NA
                        common stock issued
                        upon exercise of
                        outstanding common
                        stock purchase warrant
---------------------------------------------------------------------------------------------------------------------
December 7, 2004        200,000 shares of            Private Investor        NA               $20,000/NA
                        common stock issued
                        upon exercise of
                        outstanding common
                        stock purchase warrant
---------------------------------------------------------------------------------------------------------------------
December 13, 2004       150,000 shares of            Private Investor        NA               $15,000/NA
                        common stock issued
                        upon exercise of
                        outstanding common
                        stock purchase warrant
---------------------------------------------------------------------------------------------------------------------
December 15, 2004       54,055 shares of             Private Investor        NA               $10,000/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
December 22, 2004       300,000 shares of            Private Investor        NA               $30,000/NA
                        common stock issued
                        upon exercise of
                        outstanding common
                        stock purchase warrant
---------------------------------------------------------------------------------------------------------------------
February 15, 2005       45,000 shares of             Consultant              NA               $19,125/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
December 12, 2005       45,000 shares of             Consultant              NA               $12,870/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
November 14, 2006       335,000 shares of            Consultant              NA               $50,250/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
December 15, 2006       1,120,000 shares of          Private Investor        NA               $56,000/NA
                        common stock issued
                        upon conversion of a
                        promissory note in
                        principal amount of
                        $50,000 (including accrued interest)
</TABLE>

                                                                               9
<PAGE>

The issuances of common stock to consultants are viewed as exempt from
registration under the Securities Act of 1933, as amended ("Securities Act"),
under section 4(2) thereof, as transactions not involving any public offering.
The private placements of the Company's common stock and the offerings of notes,
convertible notes and common stock warrants to U.S. investors, are viewed as
exempt under the provisions of Rule 506 of Regulation D under the Securities
Act. The issuance of certain notes, convertible notes and common stock warrants
to foreign investors, are viewed as exempt from registration under Regulation S
of the Securities Act.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The following discussion of our consolidated financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and notes thereto and the other financial information included
elsewhere in this report.

Certain statements contained in this report, including, without limitation,
statements containing the words "believes," "anticipates," "expects" and words
of similar import, constitute "forward looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks and uncertainties. Our actual results
may differ materially from those anticipated in these forward-looking statements
as a result of certain factors, including our ability to create, sustain, manage
or forecast our growth; our ability to attract and retain key personnel; changes
in our business strategy or development plans; competition; business
disruptions; adverse publicity; and international, national and local general
economic and market conditions.

GENERAL

We were incorporated in the State of Delaware on November 17, 1999 and will
require additional capital to execute our current and planned business
operations.

RESULTS OF OPERATIONS

During the fiscal year ended December 31, 2006, we incurred a net loss of
$2,542,265, because we had limited revenue to offset operating expenses. The
loss in fiscal 2006 was primarily attributable to general and administrative
expenses of approximately $2,349,000 that included a non-cash expense for stock
options in the amount of $769,810. In addition, we incurred cost of sales of
$238,897 in 2006.


The Independent Auditors' Report and Note 1 of the Notes to Consolidated
Financial Statements accompanying this report state that substantial doubt has
been raised about our ability to continue as a going concern. Our present
business operations do not generate enough revenue to cover our expenses. We
will have to raise capital in order to remain viable. We are continuing to incur
management and administrative costs, professional fees and other expenses. If we
are unable to raise capital we will be unable to fund our plan of operations. If
we continue to incur net losses, we may have to cease operations entirely. This
factor, among others, raises substantial doubt about our ability to continue as
a going concern.

Our ability to continue as a going concern is dependent upon our ability to
obtain funds to meet our obligations on a timely basis, obtain additional
financing or refinancing as may be required, and ultimately to attain
profitability. There are no assurances that we will be able to obtain any
additional financing or, if we are able to obtain additional financing, that
such financing will be on terms favorable to us. The inability to obtain
additional financing when needed would have a material adverse effect on our
operating results.

2006 COMPARED TO 2005

The net loss of $2,542,265 for the twelve months ended December 31, 2006,
approximated the prior year's loss of $2,580,440.

                                                                              10
<PAGE>

Cost of sales increased approximately $233,000 from the prior year. General and
administrative expenses also increased from the prior year by approximately
$500,000. The items of significant increase in general and administrative
expenses for the year ended December 31, 2006 were an increase in compensatory
expense associated with stock options of approximately $770,000 and an increase
in consulting fees of approximately $485,000.

The increases in cost of sales and in general and administrative expenses were
offset by a decrease of the accretion of convertible debt of approximately
$248,000 and a decrease in interest expense of approximately $87,000 from the
prior year.

PLAN OF OPERATION

The Company has established a wholly-owned subsidiary, a joint venture
subsidiary and limited partnerships, primarily to establish business operations
focused on providing environmental and construction technologies and services in
the Far East, the Middle East, the United States and Puerto Rico.

Our environmental remediation operations are carried out through
Delta-Envirotech, Inc., a joint venture company formed in January 2004, with Hi
Tech Consulting and Construction, Inc., to provide environmental technology and
other services for certain business segments located in the Far East and the
Middle East. We have operating control of, and a forty-five percent ownership
interest in, Delta-Envirotech. We have entered into strategic alliance
agreements with several United States-based entities with technologies and
products in the environmental field to support the Company's worldwide
activities.

Our construction technology activities are carried out by Delta Technologies,
Inc. and focused on the United States construction industry but are equally well
suited for use in Puerto Rico and internationally.

We have formed a new limited partnership for low-income housing development and
have a purchase option to acquire a parcel of land that is already zoned and
approved for this purpose. Our first low-income housing project in Puerto Rico
was rejected for re-zoning and was terminated for that reason. Our second
low-income housing project was part of a master development plan that was
terminated by the project's developer and will not go forward.

Far East (Indonesia)

In Indonesia, we formed a local joint venture company to commence energy and
waste recovery operations. The joint venture company, PT Triyudha-Envirotech,
began operations in December 2005, pursuant to a contract with Pertamina. The
initial contract that required us to process 3,000 metric tons of oil sludge was
successfully completed in October 2006. We are currently negotiating a second
contract to process an unlimited amount of oil sludge over a 12-month period at
the same refinery.

Middle East

In 2004, we entered into a strategic alliance agreement between our
environmental remediation joint venture, Delta-Envirotech, Inc. ("Envirotech"),
and ZAFF International, Ltd., to jointly pursue environmental and other projects
in the Middle East.

In August 2005, we reached a working agreement to provide equipment to
manufacture insulating concrete form (ICF) products for the building industry in
Saudi Arabia. In September 2006, Envirotech received a letter of intent from a
purchaser.

On March 8, 2007, Envirotech received the purchase agreement to supply the
equipment and services for the factory in Saudi Arabia. This is our first
contract in Saudi Arabia and our largest to date, valued at $3,369,000.

                                                                              11
<PAGE>

The equipment specified in the agreement consists of several ICF technologies
including our Delta Wall system. The agreement requires payment by letter of
credit in four installments. We anticipate that the letter of credit will be
opened during the second quarter of 2007 and that the final payment will be
received in the first quarter of 2008.

During July and August 2006, we announced that Envirotech expanded its product
line by securing the master distribution rights for the Middle East for
environmentally friendly organic emulsifiers used to clean oil wells and oil
storage tanks, as well as a gas-imaging product used in oilfield and refining
operations. These products are currently being evaluated or scheduled for
testing during the second quarter of 2007.

United States

In August 2005, Delta Technologies, Inc. acquired, certain intellectual property
and filed a patent application for a new insulating concrete wall forming (ICF)
system, now know as Delta Wall. In addition to the patent filing, the Company
engaged a technical consultant and a business development consultant to further
the design and development of the Company's ICF products.

The machine tool equipment required to produce the new product was completed in
July 2006 and production began on September 15. An independent testing
laboratory is currently evaluating the Delta Wall blocks for the purpose of
applying for International Commercial Code (ICC) approval.

Puerto Rico

In November 2006, we formed a new limited partnership to acquire a suitable
parcel of land for a new housing development approved for Section 124 housing
and zoned for residential construction. In January 2007, we secured an option on
a 13 acre tract in Toa Alta that met these requirements. Currently, we are in
the process of obtaining bank financing to acquire the property and begin
construction of the first phase of the project that will ultimately consist of
approximately 338 residential housing units.

Our initial Section 124 housing project for approximately 270 homes on a 36 acre
tract in Aguadilla was ultimately rejected for re-zoning and has been
discontinued. As of December 31, 2006, we wrote off the deposit on the land
associated with this project.

Our second majority owned joint venture was established, in conjunction with
another developer, to build approximately 300 Section 124 homes on a 40 acre
tract located in Guayanilla. This tract of land was part of a 150 acre master
development plan. In March 2007, the project's developer informed us that he has
elected not to proceed with the proposed development of this property and this
project will not go forward.

 FUNDING

We are currently dependent on equity investments or borrowing from private
investors to pay our operating expenses. There are no assurances that such
investors will continue to advance funds or invest in the Company's securities.
In the event we are unable to obtain additional capital or funding we may be
unable to pursue our business plans. We anticipate that we will be required to
raise capital in the approximate amount of $700,000 in the next six months in
order to continue to fund our current activities and to finance our planned
business operations.

LIQUIDITY

We have generated limited revenue from our current operations. We must rely
primarily on private placements of Company stock or debt to pay operating
expenses.

                                                                              12
<PAGE>

At December 31, 2006 we had a working capital deficit of $1,208,048, a decrease
in our working capital deficit as compared with 2005. This decrease for the year
ended December 31, 2006 is a result of an increase in cash and prepaid expenses
and a decrease in accounts payable and accretion of convertible debt. Since we
have limited sources of revenue, we expect a working capital deficit until our
revenue is sufficient to cover our operating expenses.

In 2006, to provide financing for our activities, we raised $834,500 of equity
capital, through the sale of 17,182,212 shares of common stock and raised
$73,000 through the exercise of our common stock warrants. In addition, in May
2006, we borrowed $46,000 from two related parties pursuant to a 6% convertible
note in the principal amount of $16,000 and a 6% promissory note in the
principal amount of $30,000, respectively. The maturity dates of the notes are
November 2007 and May 2008, respectively.


ASSETS

At December 31, 2006, we had total assets of $1,044,549, compared to total
assets of $870,108 at December 31, 2005. The increase in total assets as of
December 31, 2006 was due to an increase in cash, prepaid expenses and fixed
assets, offset by a decrease in accounts receivable.


CRITICAL ACCOUNTING ISSUES

The Company's discussion and analysis of its financial condition and results of
perations are based upon the Company's financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of the financial statements requires
the Company to make estimates and judgments that affect the reported amount of
assets, liabilities, and expenses, and related disclosures of contingent assets
and liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to intangible assets, income taxes and contingencies and
litigation. The Company bases its estimates on historical experience and on
various assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.

Other Matters

Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 158, "Employers'
Accounting for Defined Benefit and Other Post Retirement Plans," an amendment of
FASB Statements No. 87, 88, 106 and 132(R). SFAS 158 requires employers to
recognize their defined benefit plans' overfunded orunderfunded status in their
balance sheets, requires employers to measure planassets and plan obligations as
of the balance sheet date, immediately recognize any remaining transition
obligations currently being deferred, and recognize actuarial gains and losses
through other comprehensive income. The Statement is effective for fiscal years
ending after December 15, 2006

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements,"
which enhances existing guidance for measuring assets and liabilities using fair
value. This Standard provides a single definition of fair value, together with a
framework for measuring it, and requires additional disclosure about the use of
fair value to measure assets and liabilities. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. The Company does not believe that
SFAS No. 157 will have a material impact on its consolidated financial
statements.

In September 2006, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements" ("SAB No. 108"). SAB No. 108 provides guidance on the consideration
of effects of the prior year misstatements in quantifying current year
misstatements for the purpose of a materiality assessment. We adopted SAB No.
108 in the fourth quarter of 2006 and the adoption did not impact our
consolidated financial results.

                                                                              13
<PAGE>

In July 2006, the FASB issued Interpretation No. 48 "Accounting for Uncertainty
in Income Taxes" ("FIN 48"). The interpretation requires a two step approach for
recognizing and measuring tax benefits based on a recognition threshold of "more
likely than not." The FASB also requires explicit disclosures about
uncertainties in tax positions including a detailed rollforward of tax benefits
that do not qualify for financial statement recognition. The adoption of FIN 48
is effective for fiscal years beginning after December 15, 2006. While the
Company's analysis of the impact of this Interpretation is not yet complete, we
do not anticipate it will have a material impact on the consolidated financial
statements or with any of the Company's debt covenants.

In February 2007, the FASB issued SFAS No. 159 "The Fair Value Option for
Financial Assets and Financial Liabilities," providing companies with an option
to report selected financial assets and liabilities at fair value. The
Standard's objective is to reduce both complexity in accounting for financial
instruments and the volatility in earnings caused by measuring related assets
and liabilities differently. It also requires entities to display the fair value
of those assets and liabilities for which the Company has chosen to use fair
value on the face of the balance sheet. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. The Company is currently evaluating the
impact of the adoption of this Statement on its consolidated financial
statements.

FOREIGN CURRENCY TRANSLATION

The functional currency for some foreign operations is the local currency.
Assets and liabilities of foreign operations are translated at balance sheet
date rates of exchange and income, expense and cash flow items are translated at
the average exchange rate for the period. Translation adjustments in future
periods will be recorded in Other Comprehensive Income. The translation gains or
losses were not material for the year ended December 31, 2006.

GOODWILL AND OTHER INTANGIBLES

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 specifies the financial accounting and reporting for
acquired goodwill and other intangible assets. Goodwill and intangible assets
that have indefinite useful lives are not amortized but rather they are tested
at least annually for impairment unless certain impairment indications are
identified.

Quantitative and Qualitative Disclosures About Market Risk

Fair Value of Financial Instruments - The following disclosure of the estimated
fair value of financial instruments is made in accordance with the requirements
of Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments". The estimated fair values of financial
instruments have been determined by the Company using available market
information and appropriate valuation methodologies.

However, considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that the Company could realize in
a current market exchange.

The Company has not entered into, and does not expect to enter into, financial
instruments for trading or hedging purposes. The Company does not currently
anticipate entering into interest rate swaps and/or similar instruments.

The Company's carrying values of cash, marketable securities, accounts
receivable, accounts payable and accrued expenses are a reasonable approximation
of their fair value.

ITEM 7. FINANCIAL STATEMENTS.

                                                                              14
<PAGE>

The Company's Consolidated Financial Statements and Notes to Consolidated
Financial Statements are attached hereto as Exhibit A and incorporated herein by
reference.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

There have been no changes in or disagreements with the Company's independent
auditors during the last two years.


ITEM 8A. CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures:

Based on their evaluation as of the close of the fiscal year covered by this
report, Peter F. Russo, our Chief Executive Officer, and Martin G. Chilek, our
Chief Financial Officer, have concluded that the Company's disclosure controls
and procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in this Annual Report on Form 10-KSB. There have been no changes in the
Company's internal controls or in other factors which could significantly affect
internal controls subsequent to the date the Company carried out its evaluation.

Limitations on the effectiveness of controls:

A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Because of inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues, if any,
within a company have been detected.


ITEM 8B. OTHER INFORMATION.

None.

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

DIRECTORS AND EXECUTIVE OFFICERS

As of the date of this report, the executive officers and director of Delta
Mutual, Inc. were as follows:

<TABLE>
<CAPTION>
NAME                          AGE                         TITLE(S)
----------                  --------                    ------------
<S>                           <C>              <C>
Peter F. Russo                64               President, CEO, Assistant Secretary
                                               and Director

Martin G. Chilek              56               Sr. Vice President, Chief
                                               Financial Officer, Treasurer and Secretary
</TABLE>


Peter F. Russo joined the Company on March 11, 2003 as President and a director,
and was elected Chief Executive Officer in June 2003. Mr. Russo had been an
independent consultant to several private businesses during the period from
August 2001 until he joined the Company. In that capacity, he developed business
and operating strategies and plans for a start-up, new concept modular housing
company focused on the affordable housing market. In that assignment, he
developed proposals for low-income housing projects under the federal Section 42
tax credit program in Philadelphia, Baltimore and Washington D.C. In another
assignment, Mr. Russo was instrumental in structuring a new U.S. holding company
with affiliated real estate service operations in Europe. From June 2000 to July
2001, Mr. Russo served as President and Chief Operating Officer for Bartram
Healthcare Financial Services, Inc., a start-up healthcare services company
providing financial systems and services.

                                                                              15
<PAGE>

Martin G. Chilek joined the Company as Vice President, CFO, Treasurer and
Assistant Secretary in January 2004. He was promoted to Senior Vice President
and elected Secretary in March 2006. Prior to joining the Company, from June
2003 to December 2003, he was an independent consultant providing transitional
management, strategic planning and financial management services to privately
held and public companies. During the past five years, Mr. Chilek also served as
Vice President-Operations of MicroTech Leasing Corporation from October 2000
through May 2003.

Our directors are elected by the stockholders and our officers are appointed by
our board of directors. Our officers hold office until their successors are
elected and qualified. Vacancies in our board are filled by the board itself.
There are currently two vacancies on our board of directors.

There are no family relationships between any of our executive officers and/or
directors.

AUDIT COMMITTEE

We do not have a separate Audit Committee. Our full Board of Directors performs
the functions usually designated to an Audit Committee.

CODE OF CONDUCT

We have a corporate code of conduct and a corporate disclosure policy in place,
which provide for internal procedures concerning the reporting and disclosure of
corporate matters that are material to our business and to our stockholders. Our
corporate code of conduct includes a code of ethics for our officers and
employees as to workplace conduct, dealings with customers, compliance with
laws, improper payments, conflicts of interest, insider trading, company
confidential information, and behavior with honesty and integrity. Our corporate
disclosure policy includes guidelines for publicly disseminating financial and
other material developments to the investing public.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

We believe that during 2006, all of our officers and directors complied with the
reporting requirements of Section 16(a).

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth information for the periods indicated concerning
the aggregate compensation paid by the Company and its subsidiaries to the
Company's Executive Officers (the "Named Executives") and one former officer who
was the most highly compensated employee of the Company in 2006.


                           SUMMARY COMPENSATION TABLE

                                                                              16
<PAGE>

<TABLE>
<CAPTION>
---------------- ------- --------- -------- ---------- ----------- --------------- ---------------- ----------- -----------
   Name and       Year    Salary    Bonus     Stock      Option      Non-Equity       Change in     All Other     Total
   Principal               ($)       ($)     Awards      Awards      Incentive      Pension Value    Compen-       ($)
   Position                                    ($)        ($)           Plan        and Nonquali-     Sation
                                                                   Compensation    fied Deferred
                                                                        ($)         Compensation
                                                                                      Earnings
                                                                                         ($)

---------------- ------- --------- -------- ---------- ----------- --------------- ---------------- ----------- -----------
<S>               <C>     <C>               <C>         <C>          <C>             <C>            <C>          <C>
Peter F.          2006    $87,750                       $41,516                                                  $129,266
Russo,
President and
CEO (1)
---------------- ------- --------- -------- ---------- ----------- --------------- ---------------- ----------- -----------
                  2005    $79,200            $12,260                                                             $91,460

---------------- ------- --------- -------- ---------- ----------- --------------- ---------------- ----------- -----------

---------------- ------- --------- -------- ---------- ----------- --------------- ---------------- ----------- -----------

---------------- ------- --------- -------- ---------- ----------- --------------- ---------------- ----------- -----------
Martin G.         2006    $86,500                       $28,966                                                  $115,466
Chilek, Chief
Financial
Officer
---------------- ------- --------- -------- ---------- ----------- --------------- ---------------- ----------- -----------
                  2005    $82,100            $12,260                                                             $94,360
---------------- ------- --------- -------- ---------- ----------- --------------- ---------------- ----------- -----------

---------------- ------- --------- -------- ---------- ----------- --------------- ---------------- ----------- -----------

---------------- ------- --------- -------- ---------- ----------- --------------- ---------------- ----------- -----------
Jerome            2006    $54,000                                                                    $88,262     $142,262
Kindrachuk,                                                                                         (2)
Vice President
---------------- ------- --------- -------- ---------- ----------- --------------- ---------------- ----------- -----------
                  2005    $73,000            $12,260                                                              $85,260
---------------- ------- --------- -------- ---------- ----------- --------------- ---------------- ----------- -----------

---------------- ------- --------- -------- ---------- ----------- --------------- ---------------- ----------- -----------
</TABLE>


      (1)   Mr. Russo is also the sole director of the Company but receives no
            additional compensation for serving in that capacity.

      (2)   Upon the termination of Mr. Kindrachuk's employment with the Company
            in December 2006, he received $88,262 of his accrued salary from
            2003 and 2004.

EXECUTIVE COMPENSATION NARRATIVE

On March 11, 2003, we entered into a contract with Peter F. Russo to serve as
President. It provided for three years' employment from March 11, 2003, at a
salary of $10,000 per month through June 30, 2003, and $15,000 per month
thereafter, payable in bi-monthly installments, plus benefits. On September 20,
2004 the contract was amended to adjust the salary to $6,500 per month effective
January 1, 2004. Certain benefits were also eliminated effective the same dates.

On February 28, 2006, we entered into a new employment agreement with Mr. Russo.
This agreement was effective March 11, 2006, for a term of three years. The
agreement provides for a base salary of $180,000 per year, but until the Board
of Directors determines that the financial condition of the Company permits the
payment of that salary, the minimum salary to be paid to Mr. Russo is $6,500 per
month. In July 2006, Mr. Russo's minimum monthly salary was increased to $8,125.
The agreement contains provisions for discharge for "cause", including
disability, in which cases no further compensation or benefits would be payable
under the agreement. If a termination is other than for death or "cause", the
base salary is continued for six months following the termination of employment,
or up to the time Mr. Russo commences other full time employment. The agreement
also contains a provision for additional compensation to Mr. Russo if his
employment is terminated without "cause" due to a change in control.

                                                                              17
<PAGE>

On May 23, 2005, we entered into an executive employment agreement with Mr.
Chilek. This agreement was effective June 1, 2005, for an initial term of three
years, and the term is automatically extended for additional one year periods if
neither party gives notice of termination at least 90 days prior to the end of
the initial term or any current additional one year term. The agreement provides
for a base salary of $132,000 per year, but until the Board of Directors
determines that the financial condition of the Company permits the payment of
that salary, the minimum salary to be paid to Mr. Chilek is $6,000 per month. In
July 2006, Mr. Chilek's minimum monthly salary was increased to $7,500. The
agreement contains provisions for discharge for "cause", including disability,
in which cases no further compensation or benefits would be payable under the
agreement. If a termination is other than for death or "cause", or the Company
elects not to renew the agreement, the base salary is continued for six months
following the termination of employment, or up to the time Mr. Chilek commences
other full time employment. The agreement also contains a provision for
additional compensation to Mr. Chilek if his employment is terminated without
"cause" due to a change in control.

On July 3, 2006, the Company's board of directors cancelled: 2,500,000 stock
options granted to Mr. Russo in November 2004 with an exercise price of $0.25
per share; and 350,000 stock options granted to him in February 2006 with an
exercise price of $0.17 per share. Also on July 3, 2006, the board of directors
granted Mr. Russo 2,850,000 new stock options at an exercise price of $0.11 per
share. These actions were treated as a repricing of his stock options. The
incremental fair value of all the stock options granted to Mr. Russo in 2006 is
included as option awards in the Summary Compensation Table.

On July 3, 2006, the Company's board of directors cancelled: 1,750,000 stock
options granted to Mr. Chilek in November 2004 with an exercise price of $0.25
per share; and 250,000 stock options granted to him in February 2006 with an
exercise price of $0.17 per share. Also on July 3, 2006, the board of directors
granted Mr. Chilek 2,000,000 new stock options at an exercise price of $0.11 per
share. These actions were treated as a repricing of his stock options. The
incremental fair value of all the stock options granted to Mr. Chilek in 2006 is
included as option awards in the Summary Compensation Table.

We also had an employment contract with Mr. Kindrachuk effective July 2003,
prior to his appointment as an officer of the Company. It provided for three
years' employment beginning July 1, 2003, at a base salary of $10,000 per month,
plus benefits. On September 22, 2004 the contract was amended to adjust salary
to $6,000 per month effective January 1, 2004, until the Board of Directors
determined that the financial condition of the Company permitted the payment of
that salary. Certain benefits were also eliminated effective the same dates.

On July 1, 2006, we did not renew Mr. Kindrachuk's employment contract and he
was offered and accepted other employment with the Company as an at will
employee. His employment with the Company was terminated on December 28, 2006.

The following officers of the Company were issued shares of common stock under
the 2001 Employee Stock Option Plan ("the 2001 Plan") as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Name                                  Date of Issuance              Number of Shs.        Per Share
                                                                                          Valuation
-------------------------------------------------------------------------------------------------------------
<S>                                   <C>                           <C>                      <C>
Peter F. Russo                        January  21, 2005             122,600                  $0.10
-------------------------------------------------------------------------------------------------------------
Martin G. Chilek                      January  21, 2005             122,600                  $0.10
-------------------------------------------------------------------------------------------------------------
Jerome Kindrachuk                     January  21, 2005             122,600                  $0.10
-------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                              18
<PAGE>

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table sets forth information as of the end of the Company's last
fiscal year concerning option and stock awards to the Company's Named
Executives.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                       Option Awards                                             Stock Awards
------------------------------------------------------------------------------------------------------------------------------------
   Name         Number of     Number of        Equity         Option      Option       Number      Market      Equity      Equity
               Securities    Securities      Incentive       Exercise   Expiration       of        Value     Incentive   Incentive
               Underlying    Underlying        Plan           Price        Date        Shares        of         Plan        Plan
               Unexercised   Unexercised      Awards:          ($)                    or Units      Shares     Awards:     Awards:
                 Options       Options       Number of                                of Stock       or       Number of   Market or
                   (#)           (#)         Securities                                 That       Units       Unearned     Payout
               Exercisable   Unexercisable   Underlying                               Have Not       of        Shares,    Value of
                                             Unexercised                               Vested      Stock      Units or     Unearned
                                              Unearned                                 (#)          That       Other       Shares,
                                              Options                                               Have      Rights     Units or
                                                 (#)                                                Not        That        Other
                                                                                                    Vested    Have Not    Rights
                                                                                                    ($)        Vested      That
                                                                                                               (#)        Have Not
                                                                                                                          Vested
                                                                                                                           ($)
------------------------------------------------------------------------------------------------------------------------------------
<S>            <C>            <C>              <C>           <C>             <C>       <C>        <C>        <C>             <C>
Peter          909,090        1,940,910       -0-            $0.11      July 2011
F.
Russo
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
Martin         909,090        1,090,910       -0-            $0.11      July 2011
G.
Chilek
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


DIRECTORS' COMPENSATION

We do not compensate directors in their capacity as such nor do we compensate
our directors for attendance at meetings. We do reimburse our officers and
directors for reasonable expenses incurred in the performance of their duties.

COMPENSATION PLANS

STOCK OPTION PLAN

In August 2004, our stockholders approved the 2004 Stock Option Plan (the "2004
Plan"), pursuant to which 10,000,000 shares of common stock were reserved for
issuance. As of December 31, 2006; 2,022,000 shares were available for the grant
of options under the 2004 Plan.

                                                                              19
<PAGE>

The 2004 Plan authorizes the Board of Directors (the "Board"), or a committee
comprised of non-employee directors ("Committee"), to grant, over a 10-year
period, options to purchase up to 10,000,000 shares of the Company's common
stock. Persons eligible to receive options under the Plan include key employees
and directors who are also employees of the Company or any subsidiary, and
consultants to the Company or any subsidiary, as determined by the Board or
Committee. The persons to be granted options under the Plan and the number and
purchase price of the shares represented by each option, the time or times at
which the options may be exercised, and the terms and provisions of each option
(which need not be uniform for all options) will be determined by the Board or
Committee. The purchase price per share may not be less than 100% of the fair
market value of the Company's stock at the time of grant. The purchase price may
be paid in cash or common stock of the Company held for at least six months with
a market value equal to that of the shares being acquired or, in the discretion
of the board or committee, any combination of these. Options granted under the
Plan may be in the form of "incentive stock options" which qualify as such under
Section 422 of the Internal Revenue Code or non-qualified stock options which do
not meet the criteria for incentive stock options under Section 422. The tax
treatment afforded stock options qualifying as incentive stock options is
generally more favorable to employees than that afforded to non-qualified stock
options, in that the exercise of an incentive stock option does not require the
optionee to recognize income for federal income tax purposes at the time of
exercise. (The difference between the exercise price of the incentive stock
option and the fair market value of the stock at the time of purchase is,
however, an item of tax preference which may require payment of an alternative
minimum tax.)

Options granted under the Plan are, generally, transferable only by will or by
the laws of descent and distribution, and may be exercised during the lifetime
of the optionee only by the optionee or by his legal representative in the event
of his disability. In its sole discretion, however, the Board or Committee may
permit an optionee to make certain transfers of non-qualified stock options,
provided that the transfers are to "family members" and are not for value, as
defined in the General Instructions to Form S-8 under the Securities Act of
1933.

The term of each option cannot be more than 10 years from the date of grant, and
options can be exercised only during the participant's employment with the
Company or one of its subsidiaries. If any option expires or is terminated prior
to its exercise in full and prior to the termination of the Plan, the shares
subject to such unexercised option will be available for the grant of new
options under the Plan. Further, any shares used as full or partial payment by
an optionee upon exercise of an option may subsequently be used by the Company
to satisfy other options granted under the Plan, subject to the limitation on
the total number of shares authorized to be issued under the Plan.

The Plan permits an outstanding option to be exercised after termination of
employment only to the extent that the option was exercisable on the date of
termination but in no event beyond the original term of the option (i) within
one year by the estate or rightful heir(s) of the optionee if the optionee's
employment is terminated due to the optionee's death; (ii) within one year after
the date of such termination if the termination is due to the optionee's
Disability (as defined in the Plan); or (iii) within three months after the date
of such termination if the termination was due to the optionee's Retirement (as
defined in the Plan) or was for reasons other than death or Disability and other
than "for cause" (as defined in the Plan). Upon termination of an optionee's
employment "for cause," any unexercised options held by the optionee will be
forfeited.

Unexercised options will terminate in the event of the Company's dissolution,
liquidation, or sale of all or substantially all of its assets. In the event of
our merger with another corporation, the option would be assumed or an
equivalent option substituted by the successor corporation or, if such successor
corporation does not agree to assume the option or substitute an equivalent
option, the Board can provide for the option holder to have the right to
exercise the option as to all of the optioned shares, including shares as to
which the option would not otherwise be exercisable. The number of shares
subject to options and the option prices will be appropriately adjusted in the
event of changes in our outstanding common stock by reason of stock dividends,
recapitalizations, mergers, consolidations, stock splits and combinations of
shares, and the like. The Board may at any time terminate or modify the Plan
except, that without further approval of the stockholders, the Board may not
make any changes to the Plan which would materially increase the number of
shares that may be issued under the Plan, materially modify the eligibility
requirements for participation in the Plan, or require stockholder approval
under the Delaware General Corporation Law, the Exchange Act, or the Internal
Revenue Code.

The 2004 Plan gives the Board the power to issue a restricted stock award to an
employee representing shares of common stock that are issued subject to such
restrictions on transfer and other incidents of ownership and such forfeiture
conditions as the Board may determine ("Restricted Shares"). In connection with
issuance of any Restricted Shares, the Board may (but shall not be obligated to)
require the payment of a specified purchase price (which price may be less than
Fair Market Value as defined in the Plan).

                                                                              20
<PAGE>

OTHER PLANS

We have not adopted any other deferred compensation, pension, profit sharing,
stock option plan or programs for the benefit of our officers or employees.
During 2003, the Company established a health insurance benefit plan that is
offered to all employees. During 2004, the Company made a dental insurance plan
available to all employees.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The following table sets forth information, as of March 28, 2006, with respect
to the beneficial ownership of the Company's Common Stock by each person known
by the Company to be the beneficial owner of more than five percent (5%) of the
outstanding Common Stock and by directors and officers of the Company, both
individually and as a group:



Name and Address of Beneficial Owner      Number of Shares Owned    Percentage**
                                             Beneficially

Peter F. Russo  (1)                             1,009,090                 1.60%

Martin G. Chilek  (2)                             959,000                 1.52%


All Officers and Directors as a Group           1,986,090                 3.12%

Neil Berman  (3)                                6,517,315                 9.79%

Ben Eluzer Company  (4)                         5,000,000                 8.03%

Mesacmech Lev Company  (5)                      4,000,000                 6.42%

Devlin Development Inc.  (6)                    3,125,000                 5.02%


** Based on 62,272,286 shares outstanding on March 28, 2007.

----------------

(1) In addition to 100,000 shares owned directly, Mr. Russo holds options
expiring July 3, 2011 to purchase an aggregate of 2,850,000 shares of common
stock at an exercise price of $0.11 per share, of which 909,090 are currently
exercisable. Mr. Russo's address is c/o Delta Mutual, Inc., 111 North Branch
Street, Sellersville, PA 19860.

(2) In addition to 50,000 shares owned beneficially, Mr. Chilek holds options
expiring July 3, 2011 to purchase an aggregate of 2,000,000 shares of common
stock at an exercise price of $0.11 per share, of which 909,090 are currently
exercisable. Mr. Chilek's address is c/o Delta Mutual, Inc., 111 North Branch
Street, Sellersville, PA 18960.

(3) In addition to 4,967,395 shares owned directly, Mr. Berman holds a note
convertible into 1,549,920 shares of common stock at a conversion price of
$0.125 per share. Mr. Berman's address is 21346 St. Andrews Blvd., # 421, Boca
Raton, FL 33433.

(4) The address of the Ben Eluzer Company is 1025 - 46th Street , Brooklyn, NY
11219.

(5) The address of the Mesacmech Lev Company is 1426 - 57th Street, Brooklyn, NY
11219.

(6) The address of Devlin Development Inc. is 450 - 7th Avenue, Suite 2309, New
York, NY 10016.

                                                                              21
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

None.


ITEM 13. EXHIBITS.

Exhibit No.                 Description of Exhibits
------------     ---------------------------------------------------------------

3.1              Articles of Incorporation of the Company, as currently in
                 effect, incorporated herein by reference to Exhibit 3.1 to
                 Amendment No. 1 to the Company's Registration Statement on Form
                 10-SB filed with the Commission on June 15, 2000.

3.1a             Amendment to Certificate of Incorporation, filed September 1,
                 2004. Incorporated herein by reference to Exhibit 3.1a to the
                 Company's Current Report on Form 8-K, filed with the Commission
                 on September 3, 2004.

3.1b             Form of Restatement of Certificate of Incorporation of Delta
                 Mutual, Inc., as amended. Incorporated herein by reference to
                 Exhibit 3.1b to the Company's Quarterly Report on Form 10-QSB,
                 filed with the Commission on November 15, 2004.

3.2              By-Laws of the Company. Incorporated herein by reference to
                 Exhibit 3.2 to Amendment No. 1 to the Company's Registration
                 Statement on Form 10-SB filed with the Commission on June 15,
                 2000.

3.2a             Amendment to Article III, Section I of the By-Laws.
                 Incorporated herein by reference to the Company's quarterly
                 report on Form 10-QSB, filed with the Commission on November
                 21, 2000.

                                                                              22
<PAGE>

4.1              Delta Mutual, Inc. 2001 Employee Stock Option Plan,
                 incorporated herein by reference to Appendix B to the Company's
                 definitive Information Statement pursuant to Section 14C of the
                 Exchange Act, filed with the Commission on November 9, 2001.

4.2              Delta Mutual, Inc. 2001 Employee Stock Option Plan, as amended
                 December 1, 2003.

4.2a             Delta Mutual, Inc. 2004 Stock Option Plan. Incorporated herein
                 by reference to Exhibit B to the Company's Definitive Proxy
                 Statement, filed with the Commission on June 16, 2004.

4.3              Form of 6% Convertible Promissory Notes of the Company due
                 2006. Incorporated by reference to Exhibit 4.3 to the Company's
                 Current Report on Form 8-K, filed with the Commission on
                 September 24, 2004.

4.4              Form of Warrants to purchase shares of Common Stock, of the
                 Company issued to the purchasers of the Company's 6%
                 Convertible Promissory Notes. Incorporated by reference to
                 Exhibit 4.4 to the Company's Current Report on Form 8-K, filed
                 with the Commission on September 24, 2004.

4.5              4% Convertible Promissory Note of the Company due May 2006
                 issued in the principal amount of $129,160 on May 12, 2004.
                 Incorporated herein by reference to Exhibit 4.5 to the
                 Company's Quarterly Report on Form 10-QSB, filed with the
                 Commission on November 15, 2004.

4.5a             Amendment, dated as of May 2, 2006, to 4% Convertible
                 Promissory Note in the principal amount of $129,160, filed
                 herewith.

4.5b             Amendment, dated as of July 6, 2006, to 4% Convertible
                 Promissory Note in the principal amount of $129,160, filed
                 herewith.

4.5c             Amendment, dated as of October 10, 2006, to 4% Convertible
                 Promissory Note in the principal amount of $129,160, filed
                 herewith.

4.5d             Amendment, dated as of November 27, 2006, to 4% Convertible
                 Promissory Note in the principal amount of $129,160, filed
                 herewith.

4.5e             Amendment, dated as of February 21, 2007, to 4% Convertible
                 Promissory Note in the principal amount of $129,160, filed
                 herewith.

4.6              4% Convertible Promissory Note of the Company due May 2006
                 issued in the principal amount of $193,740 on May 12, 2004.
                 Incorporated herein by reference to Exhibit 4.6 to the
                 Company's Quarterly Report on Form 10-QSB, filed with the
                 Commission on November 15, 2004.

4.6a             Amendment, dated as of May 2, 2006, to 4% Convertible
                 Promissory Note in the principal amount of $193,740, filed
                 herewith.

4.6b             Amendment, dated as of July 6, 2006, to 4% Convertible
                 Promissory Note in the principal amount of $193,740, filed
                 herewith.

4.6c             Amendment, dated as of September 8, 2006, to 4% Convertible
                 Promissory Note in the principal amount of $193,740, filed
                 herewith.

4.6d             Amendment, dated as of November 21, 2006, to 4% Convertible
                 Promissory Note in the principal amount of $193,740, filed
                 herewith.

                                                                              23
<PAGE>

4.7              4% Convertible Promissory Note "A" of the Company due December
                 2006 issued in the principal amount of $157,000 on July 1,
                 2004. Incorporated herein by reference to Exhibit 4.7 to the
                 Company's Quarterly Report on Form 10-QSB, filed with the
                 Commission on November 15, 2004.

4.8              4% Convertible Promissory Note "B" of the Company due January
                 2007 issued in the principal amount of $37,500 on July 16,
                 2004. Incorporated herein by reference to Exhibit 4.8 to the
                 Company's Quarterly Report on Form 10-QSB, filed with the
                 Commission on November 15, 2004.

4.9              6% Promissory note of the Company due December 2005 issued in
                 the principal amount of $71,731.29 on March 22, 2005.
                 Incorporated herein by reference to Exhibit 4.9 to the
                 Company's current report on Form 8K filed with the Commission
                 on March 25, 2005.

4.10             8% Promissory note of the Company due October 2, 2005 issued in
                 the principal amount of $210,655.04 on April 5, 2004.
                 Incorporated herein by reference to Exhibit 4.10 to the
                 Company's current report on Form 8K filed with the Commission
                 on April 11, 2005.

10.1             Agreement of Sale with Enterprises Solutions, Inc. dated May
                 11, 2001, and amendments. Incorporated herein by reference to
                 Exhibit 10.2 to the Company's current report on Form 8-K, filed
                 with the Commission on May 23, 2001.

10.2             Promissory note from Enterprises Solutions, Inc. dated October
                 31, 2001. Incorporated by reference to Exhibit 10.3 to the
                 Company's annual report on Form 10-KSB, filed with the
                 Commission on April 16, 2002.

10.3             Promissory Note to Rosanne Solomon dated November 27, 2001.
                 Incorporated herein by reference to Exhibit 10.1 to Amendment
                 No. 3 to the Company's registration statement on Form S-4,filed
                 with the Commission on November 30, 2001.

10.4             License Agreement with Enterprises Solutions, Inc. dated
                 December 11, 2001. Incorporated by reference to Exhibit 10.5 to
                 the Company's annual report on Form 10-KSB, filed with the
                 Commission on April 16, 2002.

10.5             Employment Agreement between Kenneth A. Martin and the Company.
                 Incorporated by reference to Exhibit 10.6 to the Company's
                 annual report on Form 10-KSB, filed with the Commission on
                 April 16, 2002.

10.6             Agreement, dated January 13, 2003, between the Company and
                 Kenneth A. Martin. Incorporated by reference to Exhibit 10.7 to
                 the Company's registration statement on Form S-8, filed with
                 the Commission on February 13, 2003.

                                                                              25
<PAGE>

10.7             Agreement, dated February 3, 2003, between the Company and
                 Peter F. Russo. Incorporated by reference to Exhibit 10.8 to
                 the Company's registration statement on Form S-8, filed with
                 the Commission on February 13, 2003.

10.8             Agreement, dated February 4, 2003, between the Company and J.
                 Dapray Muir. Incorporated by reference to Exhibit 10.9 to the
                 Company's registration statement on Form S-8, filed with the
                 Commission on February 13, 2003.

10.9             Executive Employment Agreement, effective March 11, 2003, by
                 and between the Company and Peter F. Russo. Incorporated herein
                 by reference to Exhibit 10.8 to the Company's Annual Report on
                 Form 10-KSB, filed with the Commission on April 14, 2003.

10.10            Consulting Agreement, effective February 28, 2003, between
                 M.U.R.G., LLC and Delta Mutual, Inc. Incorporated herein by
                 reference to Exhibit 10.9 to the Company's Annual Report on
                 Form 10-KSB, filed with the Commission on April 14, 2003.

10.11            Agreement, March 31, 2003, between the Company and Burrows
                 Consulting Inc. Incorporated herein by reference to Exhibit
                 10.3 to the Company's current report on Form 8-K, filed with
                 the Commission on April 25, 2003.

10.12            License Agreement with Joseph Friedman and Sons, International,
                 Inc., dated April 2, 2003. Incorporated herein by reference to
                 Exhibit 10.7 to the Company's Annual Report on Form 10-KSB,
                 filed with the Commission on April 14, 2003.

10.13            Agreement, dated July 1, 2003, between the Company and Gary T.
                 Robinson. Incorporated herein by reference to Exhibit 10.10 to
                 the Company's registration statement on Form S-8, filed with
                 the Commission on August 20, 2003.

10.14            Agreement, dated August 29, 2003, between the Company and
                 Burrows Consulting Inc. Incorporated herein reference to
                 Exhibit 10.10 to the Company's current report on Form 8-K,
                 filed with the Commission on September 4, 2003.

                                                                              26
<PAGE>

10.15            Strategic Alliance Agreement, dated September 10, 2003, between
                 Delta-Envirotech, Inc. and ZAFF International Ltd. Incorporated
                 herein by reference to Exhibit 99.2 to the Company's current
                 report on Form 8-K, filed with the Commission on January 22,
                 2004.

10.16            Agreement, dated January 14, 2004, by and between Delta Mutual,
                 Inc. and Hi Tech Consulting and Construction, Inc. Incorporated
                 herein by reference to Exhibit 10.16 to the Company's Annual
                 Report on Form 10-KSB, filed with the Commission on April 6,
                 2004.

10.17            Agreement to Purchase Stock, dated January 14, 2004, between
                 Delta Mutual, Inc. and Hi Tech Consulting and Construction,
                 Inc., as sellers, and Ali Razmara, as purchaser. Incorporated
                 herein by reference to Exhibit 10.17 to the Company's Annual
                 Report on Form 10-KSB, filed with the Commission on April 6,
                 2004.

10.18            Consulting Agreement, dated as of March 21, 2004, between
                 Delta Mutual, Inc. and Clark Street Capital. Incorporated
                 herein by reference to Exhibit 10.18 to the Company's Quarterly
                 Report on Form 10-QSB, filed May 19, 2004.

10.19            Consulting Services Agreement, dated as of April 16, 2004,
                 between Delta Mutual, Inc. and Basic Investors, Inc.
                 Incorporated herein by reference to Exhibit 10.19 to the
                 Company's Quarterly Report on Form 10-QSB, filed May 19, 2004.

10.20            Memorandum of Understanding, dated as of March 17, 2004, by and
                 between Delta-Envirotech, Inc., PT Faryan Nusantara and
                 Crescent Aeronautical Technology. Incorporated herein by
                 reference to Exhibit 10.20 to the Company's Quarterly Report on
                 Form 10-QSB, filed May 19, 2004.

10.21            Agreement, dated April 5, 2004, Trans Indies Realty Investment
                 Corporation and Delta Developers Corp. Incorporated herein by
                 reference to Exhibit 10.21 to the Company's Quarterly Report on
                 Form 10-QSB, filed August 12, 2004.

                                                                              27
<PAGE>

10.22            Term Sheet, dated May 12, 2004, among Delta Mutual, Inc., Neil
                 Berman and Ivano Angelastri. Incorporated herein by reference
                 to Exhibit 10.22 to the Company's Quarterly Report on Form
                 10-QSB, filed August 12, 2004.

10.23            Term Sheet, dated July 1, 2004, between Delta Mutual, Inc. and
                 Neil Berman. Incorporated herein by reference to Exhibit 10.23
                 to the Company's Quarterly Report on Form 10-QSB, filed August
                 12, 2004.

10.24            Settlement Agreement and Mutual General Releases, dated
                 November 26, 2004, between the Company and Joseph Friedman and
                 Sons International, Inc. Incorporated herein by reference to
                 Exhibit 10.24 to the Company's Current Report on Form 8-K,
                 filed with the Commission on December 2, 2004.

10.26            Executive Employment Agreement, dated May 23, 2005, between
                 Delta Mutual, Inc. and Martin G. Chilek. Incorporated herein by
                 reference to Exhibit 10.26 to the Company's Current Report on
                 Form 8-K, filed with the Commission on May 25, 2005.


10.27            Investment Banking Agreement, dated June 17, 2005, between
                 Delta Mutual, Inc. and T&T Vermoegensverwaltungs AG.
                 Incorporated herein by reference to Exhibit 10.27 to the
                 Company's Current Report on Form 8-K, filed with the Commission
                 on June 30, 2005.

10.27a           Addendum, dated August 3, 2005, to Investment Banking
                 Agreement, dated June 17, 2005, by and between Delta Mutual,
                 Inc. and T&T Vermoegensverwaltungs AG. Incorporated herein by
                 reference to Exhibit 10.27a to the Company's Amended Current
                 Report on Form 8-K, filed with the Commission on August 18,
                 2005.

10.28            Purchase Agreement, dated August 26, 2005, by and between Delta
                 Technologies, Inc., as Buyer, and Richard F. Straub, Jr. and
                 John M. Latza, as Sellers. Incorporated herein by reference to
                 Exhibit 10.28 to the Company's Current Report on Form 8-K,
                 filed with the Commission on August 31, 2005.

10.29             Consulting Services Agreement, dated August 26, 2005, by and
                 between Delta Mutual, Inc. and Juan Bautista Rodriguez Pagan.
                 Incorporated herein by reference to Exhibit 10.29 to the
                 Company's Current Report on Form 8-K, filed with the Commission
                 on August 31, 2005.

10.30            Consulting Services Agreement, dated August 26, 2005, by and
                 between Delta Technologies, Inc. and Richard F. Straub, Jr.
                 Incorporated herein by reference to Exhibit 10.30 to the
                 Company's Current Report on Form 8-K, filed with the Commission
                 on August 31, 2005.

10.31            Service Order, dated February 6, 2006, between Pertamina and
                 PT. Triyudha. Incorporated herein by reference to Exhibit 10.31
                 to the Company's Current Report on Form 8-K, filed with the
                 Commission on February 27, 2006.

10.32            Executive Employment Agreement, dated February 28, 2006,
                 between Delta Mutual, Inc. and Peter F. Russo. Incorporated
                 herein by reference to Exhibit 10.32 to the Company's Current
                 Report on Form 8-K, filed with the Commission on March 1, 2006.

10.33            Form of 8% Term Notes issued April 5, 2005 by Delta Mutual,
                 Inc., in the aggregate principal amount of $210,655.
                 Incorporated herein by reference to Exhibit 10.33 to the
                 Company's Annual Report on Form 10-KSB, filed with the
                 Commission on April 3, 2006.

                                                                              28
<PAGE>

10.33a           Form of Amendment, dated September 30, 2005, to Delta Mutual,
                 Inc. 8% Term Notes issued April 5, 2005. Incorporated herein by
                 reference to Exhibit 10.33a to the Company's Annual Report on
                 Form 10-KSB, filed with the Commission on April 3, 2006.

10.33b           Form of Second Amendment, dated December 19, 2005, to Delta
                 Mutual, Inc. 8% Term Notes issued April 5, 2005. Incorporated
                 herein by reference to Exhibit 10.33b to the Company's Annual
                 Report on Form 10-KSB, filed with the Commission on April 3,
                 2006.

10.33c           Form of Third Amendment, dated March 20, 2006, to Delta
                 Mutual, Inc. 8% Term Notes issued April 5, 2005. Incorporated
                 herein by reference to Exhibit 10.33c to the Company's Annual
                 Report on Form 10-KSB, filed with the Commission on April 3,
                 2006.

10.33d           Form of Fourth Amendment, dated as of June 2, 2006, to 8% Term
                 Notes issued April 5, 2005, filed herewith.

10.34            Placement Agent Agreement, dated June 6, 2006, between Delta
                 Mutual, Inc. And SDM Consultant Corporation, filed herewith.

14.              Delta Mutual, Inc. Code of Conduct and Business Ethics.
                 Incorporated herein by reference to Exhibit 10.25 to the
                 Company's Annual Report on Form 10-KSB, filed with the
                 Commission on April 14, 2005.

31.1             Certification of Chief Executive Officer Pursuant to Section
                 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

31.2             Certification of Chief Financial Officer Pursuant to Section
                 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.1             Certification of Chief Executive Officer Pursuant to 18 U.S.C.
                 Section 1350, as Adopted Pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002, filed herewith.

32.2             Certification of Chief Financial Officer Pursuant to 18 U.S.C.
                 Section 1350, as Adopted Pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002, filed herewith.


ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(1) Aggregate fees for the last two years:

                                  2006             2005
                                  ----             ----

                                 $84,453          $99,000

(2) Audit related fees:           2006             2005
                                  ----             ----

                                 $76,953          $91,500


(3) Tax fees:
                                  2005             2004
                                  ----             ----

                                 $7,500           $7,500

                                                                              29
<PAGE>

(4) All other fees: NA

(5) Audit committee pre-approval processes, percentages of services approved by
audit committee, percentage of hours spent on audit engagement by persons other
than principal accountant's full time employees: NA


                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


DELTA MUTUAL, INC.

Dated: March 30, 2007


By:/s/ Peter F. Russo
   ------------------------------
Peter F. Russo
President, Chief Executive Officer and Director

By:/s/ Martin G. Chilek
   ------------------------------
Martin G. Chilek
Senior Vice President and Chief Financial Officer
Principal Financial Officer


In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.


     SIGNATURE                    TITLE                      DATE
-----------------           -----------------           ---------------

/s/ Peter F. Russo
---------------------
Peter F. Russo                 President                 March 30, 2007
                               and Director

                                                                              30
<PAGE>


                DELTA MUTUAL, INC. AND CONSOLIDATED SUBSIDIARIES

                          INDEX TO FINANCIAL STATEMENTS


                                                                          PAGE

Report of Independent Registered Public Accounting Firm                    F-1


Financial Statements:

Consolidated Balance Sheet as of December 31, 2006                         F-2


Consolidated Statements of Operations for the years ended
   December 31, 2006 and 2005                                              F-3


Consolidated Statements of Stockholders' Deficiency as of
   December 31, 2005 and 2006                                              F-4-5


Consolidated Statements of Cash Flows for the years ended
   December 31, 2006 and 2005                                              F-6-7


Notes to Consolidated Financial Statements                                 F-8

<PAGE>



                [LETTER HEAD OF WIENER, GOODMAN & COMPANY, P.C.]


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of
Delta Mutual Inc.



To the Board of Directors and Stockholders of
Delta Mutual Inc.

We have audited the  accompanying  consolidated  balance  sheet of Delta Mutual,
Inc. and subsidiaries ("Delta" or the "Company") as of December 31, 2006 and the
related consolidated statements of operations,  stockholders deficiency and cash
flows for each of the two years in the period ended  December  31,  2006.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of Delta Mutual, Inc. and subsidiaries
as of December  31,  2006,  and the results of their  operations  and their cash
flows  for each of the two years in the  period  ended  December  31,  2006,  in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. Since 2003, Company management
embarked upon a new mission and strategic direction, by establishing a series of
subsidiaries and joint ventures, primarily engaged in providing environmental
and construction technologies and services to certain geographic reporting
segments. As more fully explained in Note 1 to the financial statements, the
Company has a deficiency in net assets at December 31, 2006, incurred losses
from operations since inception, needs to obtain additional financing to meet
its obligations on a timely basis and to fulfill its proposed activities and
ultimately achieve a level of sales adequate to support its cost structure.

These  uncertainties  raise  substantial  doubt about the  Company's  ability to
continue as a going  concern.  Management's  plans are also described in Note 1.
The accompanying consolidated financial statements do not include an adjustments
that might result from the outcome of these uncertainties  should the Company be
unable to continue as a going concern.


Wiener, Goodman & Company, P.C.

Eatontown, New Jersey
March 29, 2007

                                      F-1
<PAGE>

                       DELTA MUTUAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET


                                     ASSETS
                                                                December 31,
                                                                    2006
                                                             -------------------


Current Assets:
    Cash                                                     $           211,147
    Prepaid expenses                                                     249,954
                                                             -------------------
     Total Current Assets                                                461,101

 Property and equipment - net                                            448,581
 Intangible asset                                                        133,467
 Other assets                                                              1,400
                                                             -------------------

      TOTAL ASSETS                                           $         1,044,549
                                                             ===================


                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities:
    Accounts payable                                         $          168,403
    Accrued expenses                                                    890,351
    Convertible debt                                                    369,740
    Notes payable                                                       240,655
                                                             -------------------

 TOTAL LIABILITIES                                                    1,669,149
                                                             -------------------

 Minority interest in consolidated subsidiaries                         241,550
                                                             -------------------

Stockholders' Deficiency:
   Common stock $0.0001 par value - authorized
     100,000,000 shares: 62,161,246 outstanding                           6,216
  Additional paid-in-capital                                          7,734,138
  Deficit                                                            (8,862,504)
  Deferred stock purchase                                               266,000
  Subscription receivable                                               (10,000)
                                                             -------------------
        Total Stockholders' Deficiency                                 (866,150)
                                                             -------------------

   TOTAL LIABILITIES AND
   STOCKHOLDERS' DEFICIENCY                                  $        1,044,549
                                                             ===================

See Notes to Consolidated Financial Statements

                                                                             F-2
<PAGE>

                       DELTA MUTUAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                           Years Ended December 31,
                                                 ----------------------------------------------
                                                          2006                   2005
                                                 ----------------------------------------------
<S>                                              <C>                           <C>
Revenue                                          $    279,870                  $     20,000
                                                 ------------                  ------------
Costs and Expenses
 Cost of Sales                                        238,897                         6,000

 General and administrative
   expenses                                         2,349,438                     1,847,561
 Impairment of long term asset                         35,200                       170,000
                                                 ------------                  ------------
                                                    2,623,535                     2,023,561
                                                 ------------                  ------------

Loss from operations                               (2,343,665)                   (2,003,561)

Accretion of convertible debt                        (175,385)                     (423,357)

Interest expense                                      (42,876)                     (130,292)
                                                 ------------                  ------------

Loss before minority interest                      (2,561,926)                   (2,557,210)

Minority interest share of (income)
   loss of consolidated subsidiaries                   19,661                       (23,230)

Benefit from income taxes                                  --                            --
                                                 ------------                  ------------

Net loss                                         $ (2,542,265)                 $ (2,580,440)
                                                 ============                  ============

 Loss per common share-
   basic and diluted                             $      (0.05)                 $      (0.10)
                                                 ============                  ============

 Weighted average number of
   common shares outstanding-
   basic and diluted                               48,419,689                    25,128,690
                                                 ============                  ============
</TABLE>

See Notes to Consolidated Financial Statements

                                                                             F-3
<PAGE>

                       DELTA MUTUAL, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

<TABLE>
<CAPTION>
                                                                 Number of
                                                                  Common        Common        Paid in     Accumulated
                                                                  Shares         Stock        Capital       Deficit
                                                                ----------   -----------   -----------    -----------
<S>                                                             <C>          <C>           <C>            <C>
Balance, January 1, 2005                                        19,133,571   $     1,913   $ 3,224,904    $(3,739,799)

Shares associated with convertible debt                          4,650,000           465          (465)            --

Issuance of common stock for conversion
      of debt and interest expense
      (valued at $0.05 per share)                                  230,852            24        11,518             --

Issuance of common stock
      for services (valued at $0.279 - $0.66 per share)            902,895            90       411,995             --

Issuance of common stock for intellectual
      property (valued at $0.43 per share)                         216,279            22        92,978             --

Sale of common stock
      (at $0.13 - $0.50 per share)                               9,075,001           907     1,138,928             --

Issuance of common stock upon exercise of warrants
      ( $0.10 per share)                                           500,000            50        49,950             --

Issuance of common stock awards from the
      Company's stock option plan (valued at $.10 per share)       613,000            61        61,239             --

Compensatory element of warrants                                        --            --       450,000             --

Deferred compensation expense                                           --            --            --             --

Net (loss)                                                              --            --            --     (2,580,440)
                                                               -----------   -----------   -----------    -----------

Balance at December 31, 2005                                    35,321,598         3,532     5,441,047     (6,320,239)
                                                               ===========   ===========    ==========    ===========

<CAPTION>

                                                                  Deferred                   Deferred
                                                                   Stock     Subscription  Compensation
                                                                  Purchase   Receivable      Expense         Total
                                                                  --------   -----------    -----------    -----------

<S>                                                               <C>        <C>            <C>            <C>
Balance, January 1, 2005                                          $     --   $        --    $        --    $  (512,982)

Shares associated with convertible debt                                 --            --             --             --

Issuance of common stock for conversion
      of debt and interest expense
      (valued at $0.05 per share)                                       --            --             --         11,542

Issuance of common stock
      for services (valued at $0.279 - $0.66 per share)                 --            --             --        412,085

Issuance of common stock for intellectual
      property (valued at $0.43 per share)                              --            --             --         93,000

Sale of common stock
      (at $0.13 - $0.50 per share)                                      --            --             --      1,139,835

Issuance of common stock upon exercise of warrants
      ( $0.10 per share)                                                --       (10,000)            --         40,000

Issuance of common stock awards from the
      Company's stock option plan (valued at $.10 per share)            --            --             --         61,300

Compensatory element of warrants                                        --            --             --        450,000

Deferred compensation expense                                           --            --       (300,000)      (300,000)

Net (loss)                                                              --            --             --     (2,580,440)
                                                                  --------   -----------    -----------    -----------

Balance at December 31, 2005                                            --       (10,000)      (300,000)    (1,185,660)
                                                                  ========   ===========    ===========    ===========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                                                             F-4
<PAGE>

                       DELTA MUTUAL, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

<TABLE>
<CAPTION>
                                                          Number of
                                                           Common        Common        Paid in       Accumulated
                                                           Shares         Stock        Capital        Deficit
                                                         ----------    -----------   -----------    -----------
<S>                                                      <C>          <C>           <C>            <C>
Issuance of common stock for convertible debt
     (valued at $0.05 - $0.125 per share)                 5,753,280           575       386,628             --

Issuance of common stock for interest expense
     (valued at $0.05 per share)                            517,426            52        25,819             --

Issuance of common stock
     for services (valued at $0.09 - $0.38 per share)     2,431,730           243       462,398             --

Issuance of common stock for settlement
     (valued at $0.19 per share)                            225,000            23        42,727             --

Sale of common stock
     (at $0.05 - $0.12 per share)                        17,182,212         1,718       832,782             --

Issuance of common stock upon exercise of  warrants
     ( $0.10 per share)                                     730,000            73        72,927             --

Deposit on common stock not yet issued                           --            --            --             --

Adoption of SFAS No. 123 (R)                                     --            --      (300,000)            --

Stock based compensation expense                                 --            --       769,810             --

Net (loss)                                                       --            --            --     (2,542,265)
                                                        -----------   -----------   -----------    -----------
Balance at December 31, 2006                             62,161,246   $     6,216   $ 7,734,138    $(8,862,504)
                                                        ===========   ===========   ===========    ===========

<CAPTION>

                                                         Deferred                    Deferred
                                                          Stock       Subscription  Compensation
                                                         Purchase      Receivable      Expense        Total
                                                         -----------   -----------    ---------    -----------
<S>                                                     <C>           <C>            <C>           <C>
Issuance of common stock for convertible debt
     (valued at $0.05 - $0.125 per share)                        --            --             --       387,203

Issuance of common stock for interest expense
     (valued at $0.05 per share)                                 --            --             --        25,871

Issuance of common stock
     for services (valued at $0.09 - $0.38 per share)            --            --             --       462,641

Issuance of common stock for settlement
     (valued at $0.19 per share)                                 --            --             --        42,750

Sale of common stock
     (at $0.05 - $0.12 per share)                                --            --             --       834,500

Issuance of common stock upon exercise of  warrants
     ( $0.10 per share)                                          --            --             --        73,000

Deposit on common stock not yet issued                      266,000            --             --       266,000

Adoption of SFAS No. 123 (R)                                     --            --        300,000            --

Stock based compensation expense                                 --            --             --       769,810

Net (loss)                                                       --            --             --    (2,542,265)
                                                        -----------   -----------    -----------   -----------
Balance at December 31, 2006                            $   266,000   $   (10,000)   $        --   $  (866,150)
                                                        ===========   ===========    ===========   ===========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                                                             F-5
<PAGE>

                       DELTA MUTUAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                     Years Ended December 31,
                                                        2006           2005

Cash flows from operating activities:

Net loss                                            $(2,542,265)    $(2,580,440)
Adjustments to reconcile net loss to
 net cash used in operating activities:
 Depreciation and amortization                           48,826           9,406
 Non-cash employee compensation                              --          61,300
 Non-cash compensation                                  427,512         423,627
 Accretion of convertible debt                          175,385         423,357
 Compensatory element of option
  issuance                                              769,810         150,000
 Impairment of long term asset                           35,200         170,000
 Minority interest in income (losses) of
  consolidated subsidiaries                             (19,661)         23,230
 Changes in operating assets
  and liabilities                                       139,153         218,371
                                                    -----------     -----------
Net cash used in operating activities                  (966,040)     (1,101,149)
                                                    -----------     -----------

Cash flows from investing activities:
 Acquisition of intellectual property
  rights                                                     --         (50,000)
 Purchase of fixed assets                               (89,258)       (360,999)
                                                    -----------     -----------

Net cash used in
  investing activities                                  (89,258)       (410,999)
                                                    -----------     -----------

Cash flows from financing activities:
 Proceeds from sale of common stock
  and deferred stock purchase                         1,100,500       1,139,835
 Proceeds from exercise of warrants                      73,000          40,000
 Proceeds from loans                                     30,000         282,385
 Repayment of loan                                      (23,910)        (47,820)
 Proceeds from convertible debt                          16,000              --
 Payments to minority interests                        (311,261)        (96,504)
 Proceeds from minority interest                        315,074         147,514
                                                    -----------     -----------

 Net cash provided by
  financing activities                                1,199,403       1,465,410
                                                    -----------     -----------

 Net increase (decrease) in cash                        144,105         (46,738)
 Cash - Beginning of year                                67,042         113,780
                                                    -----------     -----------
 Cash - End of year                                 $   211,147     $    67,042
                                                    ===========     ===========

See Notes to Consolidated Financial Statements

                                                                             F-6
<PAGE>

                       DELTA MUTUAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Continued)

<TABLE>
<CAPTION>
                                                           Years Ended December 31,
                                                           --------------------------
                                                             2006       2005
                                                           --------------------------

<S>                                                        <C>             <C>
Supplementary information:
 Cash paid during year for:
 Interest                                                  $   1,564       $  10,445
                                                           =========       =========
 Income taxes                                              $      --       $      --
                                                           =========       =========

Changes in operating assets and liabilities consists of:
 (Increase) in accounts receivable                            20,000         (20,000)
 (Increase) decrease in prepaid expenses                      15,895        (204,809)
 (Increase) decrease in deposits                                  --          74,000
 Increase in accounts payable
 and accrued expenses                                        103,258         369,180
                                                           ---------       ---------
                                                           $ 139,153       $ 218,371
                                                           =========       =========
Non-cash financing activities:

Issuance of common stock for debt                          $ 387,202       $ 232,500
                                                           =========       =========

Issuance of common stock for settlement                    $  42,750       $      --
                                                           =========       =========

Issuance of common stock for services                      $ 462,641       $      --
                                                           =========       =========

Issuance of common stock for intellectual
 property rights                                           $      --       $  93,000
                                                           =========       =========
</TABLE>

                                                                             F-7
<PAGE>

                       DELTA MUTUAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 For the Years Ended December 31, 2006 and 2005

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Delta Mutual, Inc. and its subsidiaries ("Delta" or the "Company") are engaged
in providing environmental and construction technologies and services to certain
geographic reporting segments in the Far East, the Middle East, the United
States and Puerto Rico.

The Company's environmental activities are conducted by its joint venture
subsidiary Delta-Envirotech, Inc. ("Envirotech") headquartered in Virginia.
Envirotech has established a strategic alliance with ZAFF International, Ltd., a
technology company in Saudi Arabia, to pursue environmental and other projects
in Saudi Arabia and other areas of the Middle East. Envirotech also formed a
local joint venture company in Indonesia, PT Triyudha-Envirotech, to perform
energy and waste recovery operations in that country.

The Company's construction technology activities are conducted through its
wholly owned U.S. subsidiary, Delta Technologies, Inc. ("Technologies").
Technologies acquired the intellectual property rights and filed a patent for a
new insulating concrete wall forming (ICF) system known as Delta Wall.

In Puerto Rico, the Company's housing development activities are conducted
through limited partnerships, of which the Company is the general partner.

BASIS OF PRESENTATION

The Company's financial statements for the year ended December 31, 2006 have
been prepared on a going concern basis which contemplates the realization of
assets and settlement of liabilities and commitments in the normal course of
business. Management recognizes that the Company's continued existence is
dependent upon its ability to obtain needed working capital through additional
equity and/or debt financing and revenue to cover expenses as the Company
continues to incur losses.

The Company's business is subject to most of the risks inherent in the
establishment of a new business enterprise. The likelihood of success of the
Company must be considered in light of the expenses, difficulties, delays and
unanticipated challenges encountered in connection with the formation of a new
business, raising operating and development capital, and the marketing of a new
product. There is no assurance the Company will ultimately achieve a profitable
level of operations.

The Company presently does not have sufficient liquid assets to finance its
anticipated funding needs and obligations. The Company's continued existence is
dependent upon its ability to obtain needed working capital through additional
equity and/or debt financing and achieve a level of sales adequate to support
its cost structure. Management is actively seeking additional capital to ensure
the continuation of its current activities and complete its proposed activities.
However, there is no assurance that additional capital will be obtained or that
the joint ventures will be profitable. These uncertainties raise substantial
doubt about the ability of the Company to continue as a going concern. The
accompanying financial statements do not include any adjustments that might
result from the outcome of these uncertainties should the Company be unable to
continue as a going concern.


SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

                                                                             F-8
<PAGE>

The Company's consolidated financial statements include the accounts of all
majority-owned subsidiaries where its ownership is more than 50 percent of
common stock. The consolidated statements also include the accounts of any
Variable Interest Entities ("VIEs") where the Company is deemed to be the
primary beneficiary, regardless of its ownership percentage. All significant
intercompany balances and transactions with consolidated subsidiaries are
eliminated in the consolidated financial statements. Where the Company's
ownership interest is less than 100 percent, the minority ownership interests
are reported in the consolidated balance sheets as a liability. The minority
ownership interest of the Company's earnings or loss, net of tax, is classified
as "Minority interest in earnings of consolidated subsidiaries" in the
consolidated statements of operations.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the period. Actual results could differ from those
estimates.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to concentration of
credit risk consist principally of accounts receivable. The Company grants
credit to customers based on an evaluation of the customer's financial
condition, without requiring collateral. Exposure to losses on the receivables
is principally dependent on each customer's financial condition. The Company
controls its exposure to credit risk through credit approvals.

LOSS PER SHARE

Basic and diluted loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding during the year. Potential
common shares are excluded from the loss per share calculation because the
effect would be antidilutive. Potential common shares relate to the convertible
debt, stock options and common stock purchase warrants. As of December 31, 2006,
there were 3,816,587 potential common shares related to convertible debt,
7,978,000 potential common shares related to stock options and no potential
common shares related to common stock purchase warrants issued by the Company.
As of December 31, 2005 there were 9,303,200 potential common shares related to
convertible debt; 8,000,000 potential common shares related to stock options and
7,580,000 potential common shares related to common stock purchase warrants
issued by the Company.

REVENUE RECOGNITION

The Company recognizes revenue in accordance with the guidance contained in SEC
Staff Accounting Bulletin No. 104 "Revenue Recognition Financial Statements"
(SAB No. 104). Revenue is recognized from the Company's environmental
remediation operation as the services are performed over the life of the
remediation contracts.

PREACQUISITION COSTS

The Company accounts for costs incurred prior to the date of acquisition of a
parcel of real property as preacquisition costs. Preacquisition cots are
capitalized if the property was acquired or the acquisition of the property is
probable. Capitalized preacquisition costs in excess of recoverable amounts are
charged to expense.

                                                                             F-9
<PAGE>

EVALUATION OF LONG-LIVED ASSETS

The Company reviews property and equipment and finite-lived intangible assets
for impairment whenever events or changes in circumstances indicate the carrying
value may not be recoverable in accordance with guidance in Statement of
Financial Accounting Standards (SFAS) No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." If the carrying value of the long-lived asset
exceeds the present value of the related estimated future cash flows, the asset
would be adjusted to its fair value and an impairment loss would be charged to
operations in the period identified.

DEPRECIATION AND AMORTIZATION

Property and equipment are stated at cost. Depreciation is provided for by the
straight-line method over the estimated useful lives of the related assets.

STOCK-BASED COMPENSATION

The Company has a stock-based compensation plan under which stock options and
stock awards are granted to employees. Effective January 1, 2006, the Company
accounts for stock based compensation under Statement of Financial Accounting
Standards ("SFAS") No. 123(R), "Share-Based Payment." The Company adopted SFAS
123(R) using the modified prospective method. Under modified prospective
application, this SFAS applies to new awards and to awards for which the
requisite service has not been rendered that are outstanding as of the required
effective date shall be recognized as the requisite service is rendered on or
after the required effective date. The compensation cost for the portion of
awards shall be based on the grant-date fair value of those awards as calculated
for either recognition or pro forma disclosures under SFAS 123. Changes to the
grant-date fair value of equity awards granted before the required effective
date of this Statement are precluded. The compensation cost for those earlier
awards shall be attributed to periods beginning on or after the required
effective date of this SFAS using the attribution method that was used under
SFAS 123, except that the method of recognizing forfeitures only as they occur
shall not be continued. Prior to January 1, 2006, the Company accounted for
stock option grants issued to employees in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," along with the
disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation," and for periods prior to January 1, 2006, the Company made the
following disclosure of pro forma net earnings and earnings per share as if the
fair-value-based method of accounting had been applied under SFAS No.123.

Had compensation cost for the Company's stock option plan been determined based
on the fair value at the grant date for awards for the year ended December 31,
2005, consistent with the provisions of SFAS No. 123, the Company's net loss and
net loss per share would have been increased to the pro forma amounts indicated
below:


                                      Year Ended
                                      December 31,
                                         2005
                                  ------------------

Net loss-as reported              $    (2,580,440)

  Deduct:  Total stock-based
           employee compensation
           expense determined
           under the fair value
           based method for all
           awards, net of taxes            585,000
                                  ------------------
Net loss-pro forma                $    (3, 165,440)
                                  ==================
Loss per common share
  basic and diluted -
  as reported                     $         (0.10)

Loss per common share
  basic and diluted-
  pro forma                       $         (0.13)

                                                                            F-10
<PAGE>

INCOME TAXES

The Company accounts for income taxes using an asset and liability approach
under which deferred taxes are recognized by applying enacted tax rates
applicable to future years to the differences between financial statement
carrying amounts and the tax basis of reported assets and liabilities. The
principal item giving rise to deferred taxes are future tax benefits of certain
net operating loss carryforwards.

FOREIGN CURRENCY TRANSLATION

The functional currency for some foreign operations is the local currency.
Assets and liabilities of foreign operations are translated at balance sheet
date rates of exchange and income, expense and cash flow items are translated at
the average exchange rate for the period. Translation adjustments in future
periods will be recorded in Accumulated Other Comprehensive Income. The
translation gains or losses were not material for the years ended December 31,
2006 and 2005.

INTANGIBLES

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 specifies the financial accounting and reporting for
acquired goodwill and other intangible assets. Goodwill and intangible assets
that have indefinite useful lives are not amortized but rather they are tested
at least annually for impairment unless certain impairment indications are
identified.

FAIR VALUE OF FINANCIAL INSTRUMENTS

For financial instruments including cash, accounts payable, accrued expenses,
and convertible debt, it was assumed that the carrying amount approximated fair
value because of the short maturities of such instruments.

RECLASSIFICATIONS

Certain reclassifications have been made to prior period amounts to conform to
the current year presentation.

NEW FINANCIAL ACCOUNTING STANDARDS

In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 158, "Employers'
Accounting for Defined Benefit Pension and Other Post Retirement Plans," an
amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS 158 requires
employers to recognize their defined benefit plans' overfunded or underfunded
status in their balance sheets, requires employers to measure plan assets and
plan obligations as of the balance sheet date, immediately recognize any
remaining transition obligation currently being deferred, and recognize
actuarial gains and losses through other comprehensive income. The statement is
effective for fiscal years ending after December 15, 2006.

                                                                            F-11
<PAGE>

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements,"
which enhances existing guidance for measuring assets and liabilities using fair
value. This Standard provides a single definition of fair value, together with a
framework for measuring it, and requires additional disclosure about the use of
fair value to measure assets and liabilities. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. The Company does not believe that
SFAS No. 157 will have a material impact on its consolidated financial
statements.

In September 2006, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements" ("SAB No. 108"). SAB No. 108 provides guidance on the consideration
of effects of the prior year misstatements in quantifying current year
misstatements for the purpose of a materiality assessment. The Company adopted
SAB No. 108 in the fourth quarter of 2006 and adoption of SAB No. 108 did not
impact our consolidated financial results.

In July 2006, FASB issued Interpretation No. 48 "Accounting for Uncertainty in
Income Taxes" ("FIN 48"). The interpretation requires a two step approach for
recognizing and measuring tax benefits based on a recognition threshold of "more
likely than not". The FASB also requires explicit disclosures about
uncertainties in tax positions including a detailed rollforward of tax benefits
that do not qualify for financial statement recognition. The adoption of FIN 48
is effective for fiscal years beginning after December 15, 2006. While the
Company's analysis of the impact of this Interpretation is not yet complete, we
do not anticipate it will have a material impact on the consolidated financial
statements or with any of the Company's debt covenants.

In February 2007, the FASB issued SFAS No. 159 ("SFAS 159") "The Fair Value
Option for Financial Assets and Financial Liabilities," providing companies with
an option to report selected financial assets and liabilities at fair value. The
Standard's objective is to reduce both complexity in accounting for financial
instruments and the volatility in earnings caused by measuring related assets
and liabilities differently. It also requires entities to display the fair value
of those assets and liabilities for which the Company has chosen to use fair
value on the face of the balance sheet. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. The Company is currently evaluating the
impact of the adoption of this Statement on its consolidated financial
statements.


2. PROPERTY AND EQUIPMENT

                        December 31, 2006
                        -----------------

Equipment                 $     455,035
Deposits on land                 35,500
Leasehold improvements            7,807
                          -------------
                                498,342
Less accumulated
Depreciation                     49,761
                          -------------

                          $     448,581
                          =============

Depreciation expense for the years ended December 31, 2006 and 2005, amounted to
$41,675 and $4,189 respectively.

                                                                            F-12
<PAGE>

3. INTANGIBLE ASSETS

Intellectual property costs are intellectual property included in a patent
application. If the patent is not issued, the Company will write-off the
unamortized amounts immediately. Other intangibles are being amortized over 20
years. Amortization expense was $7,150 and $5,217 for the years ended December
31, 2006 and 2005, respectively. Other intangible assets consist of the
following:


                                                December 31, 2006
                                        Gross Carrying        Accumulated
                                            Amount            Amortization
                                        ---------------      --------------
      Intellectual property costs       $       143,000      $        9,533
                                        ===============      ==============


Estimated amortization expense for intangible assets for the next five years is
as follows:


                                          Estimated
                                         Year Ending          Amortization
                                         December 31,           Expense
                                        --------------       -------------
                                             2007                   7,150
                                             2008                   7,150
                                             2009                   7,150
                                             2010                   7,150
                                             2011                   7,150


4. IMPAIRMENT LOSS

      During the year ended December 31, 2006, the Company wrote off the $35,200
      deposit on land related to the Puerto Rico low income housing project know
      as "Brisas del Atlantico." During the year ended December 31, 2005, the
      Company wrote off $170,000 in preacquistion design costs related to the
      same project.

5.    INVESTMENT IN JOINT VENTURES

a.    In December 2003, the Company formed a joint venture to develop
      Section 124, low income housing in the Commonwealth of Puerto Rico.
      The Company became the general partner and 75% majority owner
      of a limited partnership, Delta Development Partners, LP that owns
      the 85% majority share of Delta Developers Corp., a Puerto Rico
      corporation, formed to manage the construction and related activities
      required to build approximately 270 homes under Section 124. During
      the year ended December 31, 2006, the activities associated with
      this joint venture were discontinued. The operations of this joint
      venture have been consolidated with the Company since December 2003.

      In October 2004, the Company formed a second joint venture to develop
      Section 124 low income housing in Puerto Rico. The Company became the
      general partner and majority owner of a limited partnership, Delta
      Development Partners II, LP that owns the 85% majority share of Delta
      Developers Guayanilla Corp., a Puerto Rico corporation formed to manage
      the construction and related activities required to build approximately
      300 homes under Section 124. In March 2007, the developer of this project
      informed the Company that he will not proceed with the development of this
      property. The operations of this joint venture have been consolidated with
      the Company since October 2004.

                                                                            F-13
<PAGE>

      In November 2006, the Company entered into a new joint venture to develop
      Section 124 housing in Puerto Rico. The Company became the general partner
      and 35% minority owner of limited partnership, Delta TA, LP formed to
      manage the construction and related activities to build approximately 338
      residential units under the Section 124 program. During 2006, Bonaich
      Ventures, LLC, an investor, purchased a 9% interest in the partnership for
      $112,000. The operations of this partnership have been consolidated with
      the Company for the year ended December 31, 2006.

b.    On January 14, 2004, the Company entered into a joint venture agreement
      forming Delta-Envirotech, Inc. for the purpose of providing environmental
      technologies and services to markets in the Middle East. The joint venture
      company is based in Virginia and focuses on participating in foreign
      government sponsored pollution remediation projects. Upon formation, David
      Razmara was named President and became an employee of Delta-Envirotech.

      On January 22, 2004, the Company announced the conclusion of a strategic
      alliance agreement Between Delta-Envirotech, Inc. and ZAFF International,
      Ltd., an advanced technology company located in Saudi Arabia. The
      strategic alliance states that the two companies will jointly pursue
      projects related to soil and water reclamation projects in the Middle
      East.

      On July 14, 2004, the Company and Hi-Tech, pursuant to an agreement to
      purchase stock dated January 14, 2004, each sold 75 shares of the joint
      venture to a third party, representing a ten percent (10%) interest for
      $2. The Company and Hi-Tech each own forty-five percent (45%) of the joint
      venture.

      The operations of the joint venture have been consolidated with the
      Company for the years ended December 31, 2006 and 2005. Delta-Envirotech,
      Inc. meets the definition of a Variable Interest Entity as defined in
      Financial Accounting Standards Board Interpretation No. 46 (FIN
      46),"Consolidation of Variable Interest Entities" requiring the primary
      beneficiaries of a variable interest entity to consolidate that entity.
      The primary beneficiary of a variable interest entity is the party that
      absorbs the majority of the expected losses of the entity or receives a
      majority of the entity's expected residual return, or both, as a result of
      ownership, contractual or other financial interest in the entity.

c.    Minority interests primarily consist of ownership interest in
      Delta-Envirotech, Inc.; Delta Development Partners, L.P.; Delta
      Development Partners II, L.P.; Delta TA, LP; PT Triyudha - Envirotech;
      Delta Developers Corp. and Delta Developers Guayanilla Corp.
      The income and losses from operations of these entities and their
      respective minority interests have been reflected in the Company's
      statement of operations for the years ended December 31, 2006 and 2005.
      There are excess losses not absorbed by the minority interests due to
      limitations of their capital contributions. In future periods, the profits
      first attributable to the minority interests will be first absorbed
      against any unused losses until the losses are fully absorbed.
      The amount on the Company's balance sheets represents the minority
      interests as of December 31, 2006.


      The following represents a schedule of minority interests as of December
      31,

                                                                            F-14
<PAGE>

                                                      2006
                                                  -----------
      Delta Development Partners L.P.             $   145,092
      Delta Development Partners II, L.P.              39,741
      Delta Developers Guayanilla Corp.                    --
      Delta TA L.P.                                   110,891
      Delta-Envirotech, Inc.                               --
      PT Triyudha - Envirotech                        (54,174)
      Delta Developers Corp.                               --
                                                 ------------
                                                 $    241,550
                                                 ============


6. NOTES PAYABLE

On April 5, 2005, the Company issued 8% term notes to private investors in the
amount of $210,655, with the principal and interest due at maturity on October
2, 2005. Pursuant to note modification agreements, the maturity dates of these
notes were extended to June 5, 2006. On June 2, 2006, by further amendment,
these notes became payable on written demand by the lenders. Interest expense
for the years ended December 31, 2006 and 2005 amounted to $16,852 and $12,466,
respectively. As of December 31, 2006, accrued interest of $21,008 is included
in accrued expenses on the Company's consolidated balance sheet.


7. CONVERTIBLE DEBT

      During the year ended December 31, 2004, the Company issued convertible
      notes in the principal amounts of $961,400. The convertible notes had
      interest rates from 4% to 6% and matured at various dates between May 12,
      2006 and January 16, 2007. These notes are convertible into common stock
      at a conversion price of $0.05 to $0.125 per share. Two notes that
      originally matured in May 2006 were amended during 2006 extending the
      maturity dates until April 2007 and February 2008, respectively. The note
      with the maturity date of January 16, 2007, was converted into shares of
      common stock in the second quarter of 2006. A portion of these convertible
      notes, in the principal amount of $444,000, have an initial conversion
      price of $0.05 per share subject to adjustment if the Company issues
      common stock at a price below $0.05 per share. On September 16, 2004, the
      Company's board of directors resolved to prohibit the issuance of shares
      of common stock at a price below $0.05 per share for as long as any of the
      $444,000 convertible notes are outstanding.

      In connection with the issuance of the $444,000 convertible notes, the
      Company issued 8,880,000 common stock purchase warrants at an exercise
      price of $0.10 per share. The warrants expired March 31, 2006.

      The Company accounted for the warrants and the convertible debt with
      detachable warrants in accordance with Emerging Issues Task Force 00-27
      and 00-19 and SFAS No. 33. The Company performed calculations allocating
      the proceeds of convertible debt with detachable warrants to each
      respective security at their fair values. The Company used the conversion
      value of the convertible debt and calculated fair value of the warrants
      using the Black-Scholes valuation model for its estimate of fair value.
      The Company compared the allocated proceeds of the convertible debt to the
      difference between its conversion value and face amount. The calculated
      fair value of the convertible debt of $722,855 was recorded as the value
      of the Beneficial Conversion Feature and accordingly credited to
      Additional Paid-in Capital. The value of the warrants of $235,545 was
      recorded as a reduction of the convertible debt. The convertible debt was
      recorded at zero. The convertible debt was accreted to its current face
      value of $369,740, after 2004, 2005 and 2006 conversions, under the
      interest method per APB No. 21 until it is either converted or matures.

                                                                            F-15
<PAGE>

      During the year ended December 31, 2005, the note holders converted
      $232,500 into 4,650,000 shares of common stock, respectively. During the
      year ended December 31, 2006, the noteholders converted an additional
      $305,160 principal amount into 5,753,280 shares of common stock. At
      December 31, 2006, the Company's outstanding convertible notes were
      convertible into 3,816,587 shares of common stock.

      On May 3, 2006, the Company issued a convertible note to a related party
      in the principal amount of $16,000. The note bears interest at 6% per
      annum and matures on November 3, 2007. The note is convertible into common
      stock at a conversion price of $0.06 per share.

      The following table shows the maturities by year of total face amount of
      the long-term convertible debt obligations at December 31, 2006:



                                          2007             $  269,740
                                          2008                100,000
                                                           -----------
                                                              369,740
                                                           ===========


      For the years ended December 31, 2006 and 2005, the Company recorded
      interest expense of $26,094 and $130,292 respectively. As of December 31,
      2006, accrued interest of $42,271 is included in accrued expenses on the
      Company's consolidated balance sheet.


8. ACCRUED EXPENSES

      Accrued expenses as of December 31, 2006, consist of the following:


Professional fees          $ 61,500
Interest expense             63,278
Payroll expense             353,320
Payroll expense-officers    117,436
Payroll tax expense          36,445
Other accrued expenses      258,352
                           --------
                           $890,351
                           ========

9. LOANS FROM RELATED PARTIES

      In March 2005, the Company borrowed $71,731 from a shareholder of the
      Company, with interest at 6% per annum and the principal and interest due
      in three equal installments on June 21, September 19, and December 20,
      2005. On May 6, 2005, the Company paid the first installment consisting of
      $23,910 principal and $1,105 interest. On September 19, 2005, the Company
      paid the second installment consisting of $23,910 principal and $1,029
      interest. The note was amended on December 16, 2005 to extend the final
      installment payment to February 20, 2006. On February 3, 2006, the Company
      made the final payment consisting of $23,910 of principal and $1,563 of
      accrued interest. Interest expense for the year ended December 31, 2006
      and 2005 amounted to $349 and $3,349, respectively.

                                                                            F-16
<PAGE>

      On May 17, 2006, the Company borrowed $30,000 from a related party at
      interest of 6% per annum with the principal and interest due on May 17,
      2008. Interest expense for the years ended December 31, 2006 amounted to
      $1,122. As of December 31, 2006 accrued interest of $1,122 is included in
      accrued expenses on the Company's consolidated balance sheet. The balance
      due to the shareholder is included in Notes Payable on the Company's
      consolidated balance sheet at December 31, 2006.


10.   OTHER RELATED PARTY TRANSACTIONS

a.    The Company's subsidiary, Delta-Envirotech, Inc. ("Envirotech") pays
      monthly office rent to David Razmara, the president of Envirotech and a
      shareholder of the Company, in the amount of $1,000. The rent expense for
      the years ended December 31, 2006 and 2005 amounted to $12,000 and $-0-,
      respectively.

b.    As of December 31, 2006, Delta Developers Corp., a majority-owned
      subsidiary of the Company, eliminated $203,000 of management fees payable
      to a related party, because the Company's initial low income housing
      project in Puerto Rico was disapproved and all activities associated with
      that project were discontinued. The elimination of the management fee
      expense is included in the Company's consolidated statements of operations
      for the year ended December 31, 2006.


11.   STOCKHOLDERS' DEFICIENCY

      The Company issues shares of common stock for services or repayment of
      debt valued at fair market value at time of issuance.

a.    For the year ended December 31, 2006, the Company issued 5,753,280
      shares of common stock upon the conversion of convertible notes in the
      original principal amount of $305,160, valued at $0.05 - $0.125 per share,
      and issued 517,426 shares of common stock for payment of accrued interest
      in the amount of $25,871, valued at $0.05 per share. For the year ended
      December 31, 2005, the Company issued 4,650,000 shares of common
      stock upon the conversion of convertible notes in the principal amount of
      $232,500 valued at $0.05 per share, and 230,852 shares of common stock
      for payment of accrued interest in the amount of $11,545, also valued at
      $0.05 per share.

b.    For the year ended December 31, 2006, the Company issued 2,431,730 shares
      of common stock for services valued at $462,641 at a price per share of
      $0.09 - $0.38. For the year ended December 31, 2005, the Company issued
      902,895 shares of common stock for services valued at $412,085, at prices
      per share of $0.30 - $0.66.

c.    For the year ended December 31, 2006, the Company sold 17,182,212
      shares of common stock for net proceeds of $834,500, valued at $0.05 -
      $0.12 per share. At December 31, 2006, $266,000 classified as Deferred
      Stock Purchase is included on the Company's consolidated balance sheet.
      As of March 28, 2007, these shares have not been issued. For the year
      ended December 31, 2005, the Company sold 7,645,001 shares of common stock
      and issued 1,430,000 shares of common stock as associated commissions
      for net proceeds of $1,139,835.

d.    For the year ended December 31, 2006, the Company issued 730,000 shares of
      common stock upon the exercise of the Company's common stock purchase
      warrants at a conversion price of $73,000, valued at $0.10 per share. For
      the year ended December 31, 2005, the Company issued 500,000 shares of
      common stock upon the exercise of the Company's common stock purchase
      warrants at a conversion price of $50,000, valued at $0.10 per share.

                                                                            F-17
<PAGE>

e.    For the year ended December 31, 2005, the Company issued, to five
      employees, 613,000 shares of common stock, in the aggregate, from the
      Company's 2001 Employee Stock Option Plan (the " 2001 Plan"), for $61,300,
      valued at $0.10 per share. There were no shares of common stock from the
      2001 Plan issued during the year ended December 31, 2006.

f.    For the year ended December 31, 2006, the Company issued 225,000 shares of
      common stock in settlement of a lawsuit for $42,750, valued at $0.19 per
      share, which expense was included in the Company's consolidated statements
      of operations for the year ended December 31, 2005.


12.   BUSINESS SEGMENT INFORMATION

      The Company operates in four reportable segments. The segments are
      geographic and include the Far East (Indonesia), the Middle East, North
      America (United States) and Puerto Rico. The primary criteria by which
      financial performance is evaluated and resources allocated are revenue and
      operating income.


      The following is a summary of key financial data:

                                  Years
                              Ended December 31
                              2006          2005
                           -----------------------

Total Revenue:

            North America    $     --  $        --
            Indonesia         279,870       20,000
            Middle East            --           --
            Puerto Rico            --           --
                          -----------  -----------
                             $279,870      $20,000
                          ===========  ===========

Income (loss) from Operations:

           North America  $(2,330,053)  $(1,579,446)
           Indonesia               --      (123,998)
           Middle East         (1,100)      (27,500)
           Puerto Rico        (12,512)     (272,617)
                          -----------   -----------
                          $(2,343,665)  $(2,003,561)
                          ===========   ===========

Long-lived Assets:

           North America  $225,896
           Indonesia       322,052
           Middle East          --
           Puerto Rico      35,500
                          --------
                          $583,448
                         =========

Capital Expenditures:

           North America  $89,258        $  1,500
           Indonesia           --         359,499
           Middle East         --              --
           Puerto Rico         --              --
                          --------        --------
                          $89,258        $360,999
                        ==========      ==========

                                                                            F-18
<PAGE>

Depreciation and Amortization:

           North America  $ 12,875       $ 7,908
           Indonesia        35,950         1,498
           Middle East          --            --
           Puerto Rico          --            --
                          --------      --------
                          $ 48,826       $ 9,406
                          ========      ========

13.   INCOME TAXES

      The liability method, prescribed by SFAS No. 109, "Accounting for Income
      Taxes," is used by the Company in accounting for income taxes. Under This
      method, deferred tax assets and liabilities are based on differences
      between financial reporting and tax basis of assets and liabilities and
      are measured using the enacted tax rates and laws that are expected to be
      in effect when the differences are expected to reverse.

      During the year ended December 31, 2006, the Company recorded a deferred
      tax asset associated with its net operating loss ("NOL") carryforwards of
      approximately $8,734,479 that was fully offset by a valuation allowance
      due to the determination that it was more likely than not that the Company
      would be unable to utilize these benefits in the foreseeable future. The
      Company's NOL carryforward expires beginning in 2010 through 2017.

      There is no provision for income taxes for the years ended December 31,
      2006 and 2005 as there was no taxable income in either year.

      The types of temporary differences between tax basis of assets and
      liabilities and their financial reporting amounts that give rise to the
      deferred tax liability and deferred tax asset and their approximate tax
      effects are as follows:


                                 For the Year Ended
                                 December 31, 2006
                          --------------------------------
                            Temporary           Tax
                            Difference          Effect
                          --------------    --------------

Gross deferred tax
asset resulting
from net operating
loss carryforward         $    8,850,000    $    3,009,000

Valuation allowance       $   (8,850,000)   $   (3,009,000)
                          --------------    --------------

Net deferred income
tax asset
                          $           --    $           --
                          ==============    ==============


      The reconciliation of the effective income tax rate to the federal
      statutory rate is as follows:

                                                                            F-19
<PAGE>

                                          For the Year Ended
                                             December 31,
                                          -------------------
                                           2006         2005
                                          -------     -------
      Federal income tax rate               (34%)        (34%)
      Effect of unused operating losses      34%          34%
          Effective income tax rate           0%           0%
                                         =======      =======

14. SHARE BASED COMPENSATION

On January 1, 2006, the Company adopted SFAS No. 123(R) "Share-Based Payment,"
requiring the recognition of compensation expense in the Consolidated Statements
of Operations related to the fair value of its employee share-based options and
awards. SFAS No. 123(R) revises SFAS No. 123 "Accounting for Stock-Based
Compensation" and supercedes APB Opinion No. 25 "Accounting for Stock Issued to
Employees." SFAS No. 123(R) is supplemented by SEC Staff Accounting Bulletin
("SAB") No. 107 "Share-Based Payment." SAB No. 107 expresses the SEC staff's
views regarding the interaction between SFAS No. 123(R) and certain SEC rules
and regulations including the valuation of share-based payment arrangements.

The Company recognizes the cost of all employee stock options on a straight-line
attribution basis over their respective vesting periods, net of estimated
forfeitures. The Company has selected the modified prospective method of
transition; accordingly, prior periods have not been restated. Prior to adopting
SFAS No. 123(R), the Company applied APB Opinion No. 25, and related
interpretation in accounting for its stock-based compensation plans. All
employee stock options were granted at or above the grant date market price.
Accordingly, no compensation cost was recognized for fixed stock option grants.

On December 31, 2006, the Company had one share-based compensation plan, which
is described below. During fiscal year 2006, the adoption of SFAS No.123(R)
resulted in incremental stock-based compensation expense of $585,000. The
incremental stock-based compensation expense caused earnings before provision
for income taxes and net earnings to decrease by $585,000, and basic and diluted
earnings per common share to decrease by $0.01 per share.

Under the provisions of SFAS 123(R), the recognition of deferred compensation,
representing the amount of unrecognized restricted stock expense that is reduced
as expense is recognized, at the date restricted stock is granted, is not longer
required. Therefore, in the quarter ended March 31, 2006, the amount that had
been in "Deferred compensation" in the consolidated balance sheets was reversed
to zero.

Stock Option Plan

In December 2001, the Company's stockholders approved the 2001 Employee Stock
Option Plan (the "2001 Plan"), pursuant to which 2,000,000 shares of common
stock were reserved for issuance. In August 2004, the Company's stockholders
approved the 2004 Stock Option Plan (the "2004 Plan"), pursuant to which
10,000,000 shares of common stock were reserved for issuance. As of December 31,
2006, all shares under the 2001 Plan had been issued and 2,022,000 shares of
common stock remained available for issuance under the 2004 Plan.

The Company was also authorized to issue shares of stock to its employees from
its 2001 Plan. The Company expensed the issuance of stock awards in accordance
with SFAS No. 123. Shares issued from the2001 Plan were expensed at the time of
issuance, as the stock issued had no restrictions to the employees. There were
no stock awards to employees from the 2001 Plan during the year ended December
31, 2006 and the Company issued 613,000 shares to five employees during the
similar period of 2005. The shares issued were at fair market value as
compensation to employees. The Company recorded compensation expense of $-0- and
$61,300 in the Company's consolidated statements of operations for the years
ended December 31, 2006 and 2005, respectively.

                                                                            F-20
<PAGE>

The Company issues shares of its common stock to employees and non-employees as
stock based compensation. The Company accounts for the services using the fair
market value of the services rendered. For the year ended December 31, 2006, the
Company issued 2,431,730 common shares, and recorded expense of $462,641, of
which $250,000 was included in prepaid expenses on the consolidated balance
sheet at December 31, 2006, in conjunction with the issuance of these shares.

On February 17, 2006, the Company issued 778,000 stock options to five
employees. The Company recorded an expense of $22,050 which is included in the
consolidated statements of operations for the year ended December 31, 2006.

On July 3, 2006, the Company cancelled incentive stock options to purchase a
total of 6,478,000 shares of common stock granted in November 2004 and February
2006 to four employees; and 1,500,000 non statutory options granted in December
2005 to an employee of a subsidiary, all from the Company's 2004 Plan. Exercise
prices for these options ranged from $0.17 to $0.25 per share. In accordance
with SFAS No. 123(R), the Company expensed $75,000 and eliminated $225,000 of
deferred compensation expense related to the cancellation of the 1,500,000
non-statutory options, which is included in the consolidated statements of
operations for the year ended December 31, 2006.

On July 3, 2006, the Company replaced the cancelled options by granting
7,978,000 new stock options with an exercise price of $0.11 per share and
recorded an expense of $87,760 associated with the new option grants which is
included in the consolidated statements of operations for the year ended
December 31, 2006.

The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2006: dividends yield of 0%, expected volatility
of 116% and expected life of 5 years.

A summary of the status of the Company's options and stock awards under its
stock option plans as of December 31, 2006 and 2005, and changes during the
years then ended, is presented below.


<TABLE>
<CAPTION>
                                                 2006                                    2005
                                   ---------------------------------       ----------------------------------
                                                  Weighted-Average                        Weighted-Average
                                      Shares    Exercise Share Price          Shares    Exercise Share Price
<S>                                  <C>             <C>                    <C>               <C>
Options outstanding,
  beginning of year                  8,000,000       $   0.25               6,500,000         $   0.25

Options granted                      8,756,000       $   0.12               1,500,000         $   0.25

Options exercised                           --       $     --                      --         $     --

Stock awards granted                        --       $     --                 613,000         $   0.10

Stock awards issued                         --       $     --                (613,000)        $  (0.10)

Options cancelled/expired           (8,778,000)      $   0.24                      --         $     --
                                   ---------------------------------       ----------------------------------

Options outstanding,
  end of year                        7,978,000       $   0.11               8,000,000         $       0.25
                                   =================================       ==================================


Options price range
 at end of year                    $      0.11                                                $       0.25
                                   ===========       ===============       ==========         ===============

Options price range
  for exercised shares                      --                                                          --

Options available for grant
 at end of year                      2,022,000                              2,000,000
                                   ===========       ===============       ==========         ===============


Weighted-average fair value
 of options granted during year    $      0.12                                                $       0.25
                                   =================================       ==================================
</TABLE>

Stock compensation expense applicable to stock options and stock awards for the
years ended December 31, 2006 and 2005 was approximately $769,810 and $61,300,
respectively. The aggregate intrinsic value of options outstanding as of
December 31, 2006 was $319,120.


The following table summarizes information about fixed price stock options
outstanding at December 31, 2006.


<TABLE>
<CAPTION>
    Range of    Number Outstanding      Weighted-Average        Weighted-Average  Number Exercisable   Weighted-Average
Exercise Price  December 31, 2006   Remaining Contractual Life    Exercise Price   December 31, 2006    Exercise Price
<S>             <C>                 <C>                         <C>               <C>                  <C>
    $ 0.11          7,978,000                 4.5                       $0.11      3,908,940                   $0.11
</TABLE>


A summary of the Company's non-vested options as of December 31, 2006 and 2005,
and changes during the year ended December 31, 2006 is presented below.

                                                                            F-21
<PAGE>

                                                           Weighted-Average
                                                              Grant-Date
           Non-vested Options                 Options         Fair Value
           -----------------                  -------      ----------------

Non-vested at December 31, 2005:            1,000,000      $           0.25
Granted                                     4,847,060                  0.12
Vested                                       (525,000)                 0.25
Forfeited, expired or cancelled:           (1,253,000)                   --
                                           ----------      ----------------
Non-vested at December 31, 2006             4,069,060                  0.11
                                           ----------


At December 31, 2006, there was $2,196,250 of total unrecognized compensation
cost related to non-vested share-based compensation arrangements granted under
the 2004 Plan. The cost is expected to be recognized over a weighted average
period of 4.5 years. The total fair value of shares vested during 2006 was
$125,000. The aggregate intrinsic value of options vested during 2006 was
$36,750. Currently, the Company believes that substantially all options will
vest.

A summary of the status of the Company's stock purchase warrants as of December
31, 2006 and 2005, and changes during the years then ended, is presented below.


<TABLE>
<CAPTION>
                                                2006                                        2005
                                -------------------------------------     --------------------------------------
                                                   Weighted-Average                           Weighted-Average
                                  Shares         Exercise Share Price       Shares          Exercise Share Price
<S>                              <C>              <C>                      <C>              <C>
Warrants outstanding,
  beginning of year              7,580,000         $         0.10           8,080,000       $         0.10

Warrants granted                        --         $           --                  --       $           --

Warrants exercised                (730,000)        $         0.10            (500,000)      $         0.10

Warrants cancelled/expired      (6,850,000)        $         0.10                  --       $           --
                                -------------------------------------     --------------------------------------

Warrants outstanding,
  end of year                            --        $           --           7,580,000       $         0.10
                                =====================================     ======================================
</TABLE>




The following table summarizes information about fixed price warrants
outstanding at December 31, 2006


<TABLE>
<CAPTION>
    Range of    Number Outstanding       Weighted-Average        Weighted-Average  Number Exercisable   Weighted-Average
Exercise Price  December 31, 2006    Remaining Contractual Life    Exercise Price   December 31, 2006    Exercise Price
<S>             <C>                  <C>                         <C>               <C>                  <C>
         --             --                      --                        --                --                 --
</TABLE>



15. COMMITMENTS AND CONTINGENCIES

 a.   Executive Employment Agreements

      The Company has employment agreements with both of its principal executive
      officers.

      In February 2006, the Company entered into a new three-year employment
      agreement with Peter F. Russo, its president and CEO, effective March 11,
      2006. If Mr. Russo's employment is terminated other than for "cause," his
      base salary is continued for six months following his termination. The
      agreement also contains a provision for additional compensation if his
      employment is terminated without "cause" following a change in control.
      For the year ended December 31, 2006, the Company had accrued salary
      liability to Mr. Russo of $117,436 which is included in accrued expenses
      on the Company's consolidated balance sheet.

      In 2005, the Company entered into a three-year employment agreement with
      Martin G. Chilek, its chief financial officer, effective June 1, 2005. If
      Mr. Chilek's employment is terminated other than for "cause," or his
      employment agreement is not renewed by the Company, his base salary is
      continued for six months following his termination. The agreement also
      contains a provision for additional compensation if his employment is
      terminated without "cause" following a change in control. For the year
      ended December 31, 2006, there was no accrued salary liability to Mr.
      Chilek.

                                                                            F-22
<PAGE>

 b.   Consulting Agreements

      In August 2005, the Company entered into a consulting agreement with Juan
      B. Rodriguez Pagan ("Rodriguez") to provide certain services and
      assistance to the Company in developing its construction and building
      materials businesses. The Company agreed to pay Rodriguez 48 monthly
      payments of $6,000 over the four-year term of the agreement and issue him
      shares of common stock upon his execution of the agreement and at
      subsequent intervals during the term of the agreement. As of December 31,
      2006, the Company issued Rodriguez $516,000 of its common stock. In
      addition, Rodriguez is entitled to a commission of 5% of the sales of
      Delta Technologies, Inc. Either party may terminate the agreement upon
      written notice, however, if the Company terminates the agreement,
      Rodriguez is entitled to all of the remaining monthly payments he would
      have been entitled to receive during the term of the agreement.

      For the year ended December 31, 2006, consulting fees of $72,000 are
      included in accrued expenses on the Company's consolidated statements of
      operations. For the year ended December 31, 2006, the Company expensed
      $189,000 in consulting fees in conjunction with the issuance of common
      stock to Rodriguez. The remainder of the stock value of $248,000 is
      included as a prepaid expense on the Company's consolidated balance sheet.

      In August 2005, Delta Technologies, Inc. entered into a consulting
      agreement with Richard F. Straub, Jr. ("Straub") for a period of three
      years, to provide ongoing technical assistance and support in the
      production of Technologies' insulating concrete wall forming products.
      Technologies agreed to pay Straub $4,400 per month over the term of the
      agreement and issue him shares of common stock at subsequent intervals
      during the term of the agreement. As of December 31, 2006, 131,578 shares
      with a value of$50,000 have been issued. Technologies can terminate the
      agreement at any time, but only for cause (defined, among other things, as
      a breach of the agreement by Straub). In the event of termination for
      cause, Technologies has no further liability to Straub.

      For the year ended December 31, 2006, consulting fees of $52,800 have been
      expensed and $16,667 of the stock value is included in accrued expenses on
      the Company's consolidated statements of operations.

c.    Leases

      The Company leases its office space in Pennsylvania. The Company entered
      into a new 12-month lease on March 1, 2006 that contained a year- to-year
      renewal provision. The first renewal period became effective March 1,
      2007.

      The Company also has a month-to-month lease for a business office in Saudi
      Arabia at a cost of $1,000 per month.

      The Company's apartment lease in San Juan Puerto Rico expired on March 31,
      2006 and was not renewed.

      Future minimum lease payments are as follows:

                                   Year ending
                                  December 31,
                             ------------------------

                            2007           $   19,800
                            2008                1,950
                                           ----------
                                           $   21,750

     Rent expense was $31,800 and $47,100 for the years ended December 31, 2005
     and 2006, respectively.

                                                                            F-23
<PAGE>

15.   SUBSEQUENT EVENT

a.    In 2007, the Company issued 111,040 shares of common stock as payment of
      $13,880 of accrued interest due as of March 12, 2007, pursuant to a 4%
      convertible promissory note issued by the Company in May 2004.



                                                                            F-24